In October 2022, adidas announced it was ending its partnership with Kanye West, now known as Ye, following numerous controversies, including his antisemitic remarks. Faced with his latest actions, the three-stripes brand chose to end its most iconic partnership since 2014 and move on.
However, the German sportswear giant has revealed its results for the year and is facing an unprecedented decline. The numbers speak for themselves: adidas is reporting a loss of 54 million euros, compared to 1.49 billion euros generated in 2021, according to initial figures released by the group.
"We do not have the results we should have had" said adidas' new CEO, Bjorn Gulden, in a statement. The decision to end the partnership with Ye has sent adidas into decline for the first time in thirty years. An unprecedented situation that is starting to worry the second most influential brand in the sneaker market.
Avoiding even greater losses
adidas still holds its significant stock of Yeezy products. According to the three-stripes brand's statement, "the value of Yeezy products amounts to 1.2 billion euros". In this regard, the company continues to examine future options for using its Yeezy inventory. If the company irrevocably decides not to reuse any of the existing Yeezy products in the future, this would result in writing off the existing Yeezy inventory and would reduce the company's operating profit by an additional 500 million euros this year.
Could a reunion with Ye allow adidas to bounce back? Undeniably, Kanye West's presence alongside Yeezy helped build a significant part of adidas' reputation. It is therefore potentially possible that the German firm could reassess its collaboration with the artist in the coming months to offset its heavy financial losses.
Yet, following the termination of its contract, adidas had announced that 2023 would be marked by the return of Yeezy without its creator. Initial silhouettes without branding had even been unveiled the previous December.
Photo Credits: @masterchefian (Instagram)
The sportswear giant had also confirmed during the third quarter 2022 earnings call that the brand held the Yeezy rights and planned to use them in 2023. "Adidas is the sole owner of all registered design rights for the existing product. We intend to make use of these rights as early as 2023." stated Harm Ohlmeyer, adidas Chief Financial Officer.
A decisive year for the German firm
The loss outlook does not seem to discourage adidas, which maintains that 2023 will be a transitional year and an opportunity to focus on its consumers, athletes, and retail partners.
Nevertheless, the three-stripes brand highlights that the impact of this split will continue to be felt. Revenue is expected to decline by approximately 1.2 billion euros, and operating income by around 500 million euros. These estimates are pushing the German sportswear giant to commit to a long-term strategy. "Adidas has everything it needs to succeed... We need to put all of this in order, but I am convinced that over time Adidas will be able to shine again", says Bjorn Gulden.
Despite these statements, the partnership between the two former partners could well be reconsidered during the year. What is certain is that we look forward to learning more!