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Adidas has reportedly been left with $1.3 billion in unsellable Kanye West stock that it will have to write off as a loss after cutting its business ties with the disgraced rapper.
The sportswear giants ended its relationship with Kanye West, popularly known as Ye, after the music mogul and fashion designer made a series f antisemitism statements in late 2022.
Adidas had predicted the decision would cause the company to lose about $246 million but stressed it was the right move as it would “not tolerate” antisemitism and hate.
However, that sum has now been calculated at substantially more.
Adidas’ shares plummet following split from Kanye West
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After quickly shutting down production of Yeezy products and cutting all ties, the german sportswear brand was still left with a massive stockpile of Yeezy inventory.
According to a report, a new financial document from the company examining "accounts for the significant adverse impact from not selling the existing stock” found that Adidas had lowered predicted revenues by $1.3 billion and operating profit by $536 million for 2023, which would place its operating profit at near zero.
Adidas shares plummeted Friday morning after the company said it could lose hundreds of millions of dollars this year from its failed partnership with rapper Kanye West, whose antisemitic remarks last year prompted the sportswear giant to scrap their lucrative joint brand, Yeezy.
“The numbers speak for themselves," said Adidas CEO Bjørn Gulden, in a statement.
“2023 will be a year of transition to set the base to again be a growing and profitable company.
We will put full focus on the consumer, our athletes, our retail partners and our adidas employees. Adidas has all the ingredients to be successful: A great brand, great people, fantastic partners and a global infrastructure second to none.”
He added: “We need to put the pieces back together again but I am convinced that over time we will make Adidas shine again. But we need some time.”
The company said late Thursday that it was still reviewing whether to scrap the mountain of unsold Yeezy merchandise leftover from the partnership and warned of a “significant adverse impact from not selling the existing stock.”
Wall Street had already been expecting a rough year for Adidas, but the latest profit warning seemed to catch many who follow the company off guard.
“There is a lot of work to be done across corporate culture, product, lower sell-through rate, excess inventory and digesting Yeezy exit, all of which can be done, but will take time,” Piral Dadhania, an equity analyst at RBC Capital Markets, wrote in an investor note as per The New York Times.
Adidas reportedly facing more challenges beyond Kanye West Split
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Adidas are facing numerous challenges beyond its breakup with Ye.
According to reports, the company had been losing market share to Nike and other rivals; its expensive pullout from Russia and prolonged weakness in China have weighed on sales.
And its clothing partnership with American popstar Beyoncé is also reportedly underperforming with Sales of the singer’s Ivy Park line falling well off the company’s internal projections, according to The Wall Street Journal.
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