Adidas (ETR: ADS) has a US$530 million Yeezy problem.
Two months after severing ties with Kanye West, who now goes by Ye, Adidas is left with more than half a billion dollars worth of unsold Yeezy sneakers, according to the Financial Times.
People familiar with the matter told FT that the German sportswear giant is “scrambling to find ways” to sell the shoes under its own brand to save itself from “a painful impairment.”
The partnership with the disgraced rapper accounted for $1.8 billion, or 7%, of Adidas group’s total annual revenue in 2022. The sportswear giant decided to terminate the partnership in late October following a series of incidents of West making antisemitic remarks. The move cost West about $1.5 billion and his billionaire status.
Adidas was one of West’s most prominent partners and the company was initially criticized online for not cutting ties with the rapper sooner. Top officials have long warned of the company being “over-reliant” on the Yeezy franchise when it had been clear early on that the rapper exposed the company to reputational risk according to the FT.
The sportswear giant also did not disclose to investors how much the Yeezy franchise was contributing to the company’s annual revenue.
“They did not give us enough of an indication of how big it was and how important it was to growth,” an analyst told the FT. “Probably, they didn’t want to highlight how reliant they’ve become on the brand.”
Adidas last traded at €126.44 on the ETR, down over 50% year to date.
Information for this briefing was found via the Financial Times, ZeroHedge Twitter, and the sources and companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
