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Adidas’ separation from Ye, formerly known as Kanye West, may have a bigger fallout than initially anticipated.
The sportswear company revealed Thursday it’s expected to lose $1.3 billion in revenue and nearly $534 million in operating profit this year after ending the relationship with the rapper in October over his antisemitic comments on social media.
- The new financial guidance “accounts for the significant adverse impact from not selling the existing stock.”
- If the company doesn’t repurpose its existing Yeezy inventory and writes it off, Adidas’ operating profit would fall an additional $534 million.
Adidas also anticipates a one-off cost of up to $213 million.
“If all these effects were to materialize, the company would expect to report an operating loss of [$747 million] in 2023,” the company’s press release reads.
In October, Adidas expected that the decision to drop Ye would have a short-term hit of roughly $247 million on the company’s net income.
Rapper Royalties
Upon the termination of their relationship, Adidas immediately halted production of Yeezy-branded products and stopped all payments to Ye and his companies.
The company reportedly earned royalties of around 15% on Yeezy product sales from the partnership, which accounted for as much as 8% of Adidas’ sales, according to a report from UBS analysts.
