Last week, the apparel company Adidas said it could lose upwards of $1 billion in operating profits following its decision to cut ties with Kanye West and his Yeezy brand.
In the company’s financial guidance for 2023, the sneaker giant shared that if it does not sell its current inventory of the Yeezy brand, then it could result in an “adverse impact.” The company says the impact could mean the loss of approximately $1.3 billion in revenue and $533 million in operating profit.
The German-based company previously shared that it expected to be impacted, following the decision to move on from West, strictly based on the revenue that his clothing line brought in.
At one point, Adidas reported that the now-controversial rapper’s Yeezy line accounted for nearly $2 billion in annual revenue, which is nearly 10% of the company’s total annual revenue.
While other companies and platforms moved quickly to distance themselves from West, following his hateful and antisemitic remarks about Jewish people, Adidas took some time to make the cut.
Experts and analysts have cited his brand’s involvement in the company and the revenue it provided as a reason for Adidas’ hesitation.
However, after West’s actions, which included wearing a “White Lives Matter” shirt during a fashion show appearance, Adidas cut ties, denouncing his “hate speech.”
“Adidas does not tolerate antisemitism and any other sort of hate speech,” the company said in a statement at the time. “Ye’s recent comments and actions have been unacceptable, hateful, and dangerous, and they violate the company’s values of diversity and inclusion, mutual respect and fairness.”
After moving on from West, some thought that Adidas would strip the Yeezy label from its inventory in order to sell it, but the company said that decision on whether or not it will do so is up in the air.
However, if they decide against it, it will result in the company’s operating profit dropping by $533 million.
No matter what, Adidas is preparing for one-off costs of up to $213 million, and CEO Bjørn Gulden shared a statement saying the company will look to make transitions this year.
“The numbers speak for themselves. We are currently not performing the way we should,” Gulden in a statement. “2023 will be a year of transition to set the base to again be a growing and profitable company.”
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