Adidas’ business has been hurt by the loss of Kayne West’s Yeezy brand, the sports apparel giant said Friday while announcing its earnings result for the first quarter of 2023, highlighting the financial impact of the company’s decision to cut ties with the rapper last year following his antisemitic outbursts.
The discontinuation of Yeezy sales caused a $441 million revenue drop in the first quarter for Adidas.
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Key Takeaways
- Adidas CEO Bjorn Gulden said “loss of Yeezy…[is] of course hurting us” as the company announced a better-than-expected quarterly profit of $66 million (€60 million).
- The discontinuation of Yeezy sales has led to a $441 million (€400 million) year-over-year drop in overall sales, the company noted in its earnings press release, which makes multiple mentions of “adverse Yeezy impact.”
- Gulden warned that the outcome of this is that “2023 will be a bumpy year with disappointing numbers,” despite the narrowly profitable first quarter.
- The biggest impact of Yeezy’s discontinuation was felt in the North American market, where sales declined by 20%, while in China—where Yeezys were also popular—sales were down 9%.
- Adidas remains undecided on what it plans to do with its remaining Yeezy inventory and if the company decides not to “repurpose any of the existing Yeezy product,” it would result in a write-off that could hit the company’s profit by $551.5 million (€500 million) this year.
Big Number
$771 Million. That is the overall loss the company is projecting for 2023 if all adverse scenarios, including taking a write-off on the remaining Yeezy inventory, materialize. The additional $220 million loss on top of the Yeezy write-off has been described by Adidas as “one-off costs,” although it is unclear if this amount is Yeezy-related.
Related
Key Background
In October last year, Adidas joined several other brands in severing ties with West after the rapper made a series of antisemitic remarks on social media and in podcast appearances. The rapper’s actions resulted in him being banned from various social media platforms, leading him to double down on some of his remarks and even praising Adolf Hitler at one point. Adidas’ decision to drop Kanye also resulted in him losing his Forbes billionaire status. The rapper’s current net worth, according to our estimates, stands at $400 million.
What To Watch For
Earlier this week, a group of U.S. shareholders filed a class action suit against Adidas, accusing the company of failing to warn investors despite being aware of West’s antisemitism and “extreme behavior.” The complaint, filed with a U.S. federal court in Oregon, points to the Wall Street Journal’s report from November about West’s earlier antisemitic comments made in private in front of Adidas staff, including a suggestion that he planned to name one of his albums after Hitler. The Journal’s report found that former Adidas CEO Kasper Rorsted and other top company executives had internally discussed the risks of their partnership with West back in 2018.
This story was first published on forbes.com and all figures are in USD.
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