Why Kanye could cost Adidas billions


Jorden McVeagh, Editor 

Adidas CMO Eric Liedtke and Kanye West. Photo: Adidas


Another week, another news update on Kayne West. This time, however, it is his former business partners Adidas who are creating headlines. As it is known, Kanye has been dropped by many of his former sponsors and business partners in the past months based on some comments and statements West has made publicly. These comments were what made Adidas decide to terminate their partnership with Kayne and his Yeezy brand together. While the public image is important, Adidas has recently said that if they can not offload inventory from the Yeezy line they could stand to lose at least $1.07 billion. The initial estimate believed this move would cost the company a mere $533 million in operating profit. Why is this move such a big deal for Adidas? Kanye and Yeezy generated nearly $2 billion worth of business for Adidas. The line made up 10% of the company’s total revenue. Meaning that by dropping Kanye they are losing money and market share to competitors. As mentioned above, his remarks have cost him other deals as well. Since October companies such as Gap, Balenciaga, Footlocker and TJ Maxx have all terminated deals with the superstar. While these moves are significant, none of them hurt more than Adidas. There have been talks of Adidas repurposing the line and just not using the name Yeezy, but this could be met with some backlash from consumers. Regardless of what your ideas of the man are, most people are going to want to buy something from his line to wear instead of wearing a knockoff version of the same shoe. In addition to the $1.07 billion they lost; they could stand to lose another $213 million in one-off costs. Adidas CEO Bjorn Gulden made a recent statement to NBC News about their 2022 performance when he said, “The numbers speak for themselves. We are currently not performing the way we should… 2023 will be a year of transition to set the base to again be a growing and profitable company.” As sort of the icing on the cake, Adidas stock dropped 11% on the German Stock Exchange on Friday alone. While I won’t get into the politics behind the issues let’s look at what Adidas stands to lose. They will lose large amounts of revenue, future market share, and more costs by continuing in a different direction. The company has its values and I respect that. I am interested to see if they will decide to partner with another big-name artist in order to get back some of that lost revenue in 2023. They need to make a decision quickly because other organizations in their sector are growing at an alarming rate and will be urgent to jump on that new market share. Lululemon for example is a company looking to capitalize on this. For the first time in its 20-year history, outselling Under Armour last year. This is a trend they will look to continue this year and make a dent in the positions of companies like Adidas and Nike who hold a larger portion of the market. I will be following what Adidas does with the one-off line in the coming months. As for Kanye, losing these deals will hurt his pockets. I will too be following what he does in the fashion industry in the coming months. Plus let’s not forget a big thing here. He made “Graduation.”

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