Adidas’ termination of collaboration with Ye backfired

After American musician and designer Ye, formerly known as Kanye West, recently made a series of offensive and anti-Semitic tirades on social media and in interviews, many of his sponsoring companies have distanced themselves from him, and even JP Morgan bank has terminated its collaboration with him. Among them was Adidas, which ended its partnership with Ye, i.e., his brand Yeezy.

Now they may be regretting the abrupt decision as they have just announced that due to the termination of the collaboration with Ye’s brand they will lose about 500 million euros.

Adidas reported a 4 percent year-on-year increase in sales in the third quarter, with double-digit growth in e-commerce in EMEA, North America, and Latin America. The gross margin fell by one percentage point to 49.1 percent due to ‘higher supply chain costs, increased discounting, and an unfavorable market mix,’ the company announced.

Operating profit amounted to 564 million euros, while net profit from continuing operations was 66 million euros, a decline from 479 million euros a year ago.

– This amount differs from the preliminary figure published on October 20, 2022, due to negative tax implications in the third quarter related to the company’s decision to terminate the partnership with the Yeezy brand – Adidas announced.

The company also revealed that it has already reduced its full-year projections as a result of ‘further deterioration of trends in China, increased customs activity to reduce elevated inventory levels.

– The market environment changed in early September as consumer demand in Western markets slowed, while at the same time supply chains in China further deteriorated – said Adidas CFO Harm Ohlmeyer. As a result, we have seen a significant increase in inventory across the industry, leading to greater promotional activity for the remainder of the year, which will also impact our profit – he added.