Adidas warns of losses after the cessation of the Yeezy deal with Kanye West; may undergo losses of 1.29 billion USD

The once-profitable collaboration between Adidas and Kanye West, also known as Ye, can cause a massive loss to the sportswear brand in 2023. The company has recently reported that it can not sell its inventory of Yeezy shoes.
Adidas ended the agreement with Kanye West in the previous year. The reasons were the antisemitic comments by the rapper followed by the complaints against him.

The fallout has caused the profits of the sportswear giant to plummet substantially. Adidas expects a decline in sales by a high single rate which can lower the company’s revenue by 1.29 billion USD.
The company has further disclosed that if it can not continue with the Yeezy product going forward, it may result in the write-off of the Yeezy product inventory ad will significantly decline the company’s profits by 500 million Euros this year.

Adidas’ cancellation of partnership with Kanye West goes heavy for the retail giant:

The company has previously stated that it has not decided to continue the partnership with Kanye West of his antisemitic comments.

To this, the firm has stated that they do not tolerate antisemitism or any other kinds of hate speech. They have further agreed that West’s recent comments have been unacceptable, hateful, and dangerous. It violates the company’s notion of diversity and inclusion, fairness, and mutual respect in the workplace.

The decision has been made after a thorough revision. The company had decided to stop the production of all the Yeezy products and refrain from payments to Ye and his companies.

Kanye has been locked out of Twitter and Instagram for spreading hateful comments, and the pressure on Adidas has been triggered by social media users.

Adidas was having double thoughts and moved the agreement under review when Ye was caught into another controversy where he was seen wearing a T-shirt with a typography text showing “white lives matter” in the streets of New York and called out the black lives matter movement a scam.
The New CEO has not been dealing with the cancellation of the Yeey products but also the declining sales of its products due to collaboration with Beyonce.

In an interview, Bjorn Gulden stated that Adidas is not performing as it should. The numbers reflect that but 2023 would be a transition year for the company. Despite the situation turning out to be difficult, the company would get back on track.

Adidas has revealed the preliminary earnings for 2022. The company has declared that the revenue has increased by 6 percent and the operating profits have declined by two-three parts compared to what was recorded in 2021.
Gulden has asserted that the company will pay full focus to its consumers, athletes, retail partners, and employees in the workplace.

They will work together to cope with the brand heat, improvise their product engine and increase their distribution., thus, making Adidas a fun and efficient place to work in.
Adidas will publish the revenue results for the financial year 2022 next month. It has furthermore reported a decline of shares by 8 percent.

Analysts have stated that the partnership with Kanye West accounts for 8 percent of the total sales achieved by the company.

The decline in profits has been reflected in all the outlets around the globe. The Germany-based leading global platform has stated that it expects the sales to decline by a high single digit by the end of 2023. The company expects to suffer adversely because of the impact of not selling out on the existing Yeezy stocks. If the company continues to not move forward with the Yeezy stock, it would result in the write-off of the existing Yeezy products and would plummet the company’s operating revenue in 2023.

In addition, Adidas expects one-off costs of 200 million pounds by the end of 2023 as the company is planning for expandable growth in 2024.

In terms of equity news, the shares of Adidas declined sharply after the brand issued a decline in profits for the previous year. Furthermore, it can be triggered by the present global macroeconomic condition, which has decreased consumer spending.

The company’s financial performance was not eventful at a time when its competitors are rising in a significant manner.

Adidas stock has previously demonstrated a wild ten years. The trend has been positive, mostly increasing on a Y-O-Y basis. Despite attaining a peak in 2021, the stocks have fallen as low as 50 percent.
One of the other factors could be the covid-19 pandemic. The footwear and apparel sales have been erratic.
Accessories have seen massive sales, but the profits are not large enough to accommodate the Yeezy fallout of the company.

Presently, in terms of valuation, the company is in its worst position by the cessation of the Yeezy deal, which drove the sales of the company by 14.4 x times. The company has already lost profits, and the weakening of the economy could further trigger the loss.

Edited by Prakriti Arora