adidas Confirms $250M Expected Drop In Profit After Ye Debacle
If “how much is it really worth to you” was a company, this week that company would be adidas, which yesterday confirmed that an acceptable price for separating itself from a rapidly-imploding business partner who devolved into antisemitic rants is right about a quarter-billion dollars.
adidas updated its fiscal guidance for the year—Wall Street terminology for a hit about how much profit it might make or a warning about how much it’s likely to lose—saying that its overall net profit for 2022 would be about $250 million, compared with its original 2022 estimate of $500 million. The statement yesterday wasn’t exactly news; when adidas announced last month that it was terminating its partnership with Ye (formerly Kanye West), that it expected a $250 million hit.
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Still, saying that on a call when you announce your earnings for the third quarter hits different for investors than saying it in a press release announcing that the company was getting out of its deal with Ye, under which it manufactured and sold the popular (and dumb expensive) Yeezy-branded sneaker line. On that note, the company gave an update about what would happen with the brand next. In its October announcement, adidas dropped an important detail about how its deal with Ye was structured: the company actually owns most of the intellectual property, including the designs and colorways that make the brand iconic, while the rapper owned the trademark for the brand name “Yeezy”.
That means adidas is free to do additional drops of existing designs, even with new color schemes as long as it rebranded them as something else. Yesterday, adidas said it plans to do exactly that, possibly as soon as early next year. Just how well that will be received by consumers is up in the air. Ye stans have stood with their guy as his empire crumbles under the weight of his antisemitic tweet and other wild statements last month, including saying that George Floyd wasn’t actually killed by the 200-pound cop who kneeled on his neck for nine minutes, so adidas figures to see some backlash whenever it makes a new drop. Lots of others, though, are fine with Ye facing accountability for his statements—or are at least neutral about the whole thing.
Those folks might well be willing to spend money on rebranded former Yeezys—especially if adidas went out and found a new brand partner for the shoes.
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