Adidas and Ye Officially Finalize Their Divorce

Adidas reached an out-of-court settlement with rapper Ye that officially ends their partnership, the company said on its earnings call Tuesday. 

“There [aren’t] any more open issues, and there is no … money going either way, and we both move on,” CEO Bjørn Gulden said on the call. “There were tensions on many issues, and … when you put the claims on the right side and you put the claims on the left side, both parties said we don’t need to fight anymore and withdrew all the claims.”

The German sportswear giant split with Ye, formerly known as Kanye West, in October 2022 following antisemitic comments. Unfurling the partnership been a multifaceted headache for the company: Adidas lost more than $600 million in sales in the quarter it halted the Yeezy shoe line, faced a lawsuit from investors who claimed the company didn’t warn them about Ye’s problematic behavior, and had to figure out what to do with all the shoes.

After posting its first annual loss since 1992 in March, things are looking up for the retailer. Adidas posted third-quarter earnings earlier than initially scheduled on Oct. 15, and in its full earnings released Tuesday, the brand said there was strong growth across most regions, reflecting that Gulden’s revival plan is bearing fruit.

“The third quarter was a very strong quarter for us and again better than expected,” Gulden said in a statement. “14% underlying growth for the Adidas brand, a very healthy gross margin above 51% and an operating profit of €598 million [about $644 million] are numbers that we are very happy with and proof that we are moving in the right direction. I am especially proud that we are growing in all regions, in all channels and now also in all product divisions.”

Adidas’ Q3 revenues grew 7% to €6.438 billion, or around $7 billion, from the prior year. Excluding Yeezy sales, revenue increased 14% during the quarter. Footwear revenues increased 14% (accounting for the impact of foreign currency exchange rates), led by strong double-digit growth in Originals, the company said. 

Adidas said its gross margin of 51.3% would have been even higher without the Yeezy product. “This year’s significantly smaller and less profitable Yeezy business had a negative impact on the gross margin,” the company said. (Gross margin is the percentage of the selling price that is profit.) Adidas also said the sale of parts of remaining Yeezy inventory generated revenues of around €200 million in the quarter, significantly below Yeezy sales in the prior year (around €350 million in Q3 2023).

Adidas shares were up less than a percentage point Tuesday morning, and are up 13% year-to-date.