Quantum Brief

Adidas dumps Kanye West over anti-Semitic remarks, stands to take a $645 million hit

Adidas ends its partnership with Kanye West over anti-semitic remarks. Analysts say Adidas is looking at total losses of $645 million from severing of ties with West.

By  Aashrey BaligaOct 27, 2022 5:27 PM
Adidas dumps Kanye West over anti-Semitic remarks, stands to take a $645 million hit
Adidas has ended its partnership with musician Kanye West post his anti-Semitic remarks at the Yeezy fashion show in Paris. As a result of which the Yeezy brand will now cease to exist. All Yeezy offerings will be newly listed under the Adidas banner.

Sportswear major Adidas faces a brand nightmare after it reportedly decided to cut ties with American rapper Kanye West as a result of his anti-Semitic tirades, an ill-timed public relations disaster as the firms stock prices were already falling due to slumping sales. Adidas and West partnered to make the lucrative and popular Yeezy line of sneakers.

Why did this move shake up the industry?

Sneakers are not just considered as attractive footwear that one wears every day. Sneakers are a means of self-representation and expression for many. Sneakers are also considered as valuable collectibles. Many love to collect these sneakers and stock them as they rise in monetary value based on the demand, rarity and limited edition collaborations.

There’s a famous saying amongst sneakerheads, ‘one to stock, one to rock.’ Many buy two pairs of the same sneakers, one to wear and one to store and keep in prime condition. The global sneaker industry is well on its way to reach a valuation of over $100 billion. A large part of this is owing to the collaborations famous sneaker and apparel brands do with a number of celebrities and luxury brands

Adidas, a leading clothing and footwear brand has partnered with a number of well-known celebrities and luxury fashion brands to release some of the most popular and sought after sneakers today.

Famous musician Pharrell Williams partnered with Adidas to create a variety of sneakers that are bold and colourful, innovative and unique.

Beyonce has multiple sneaker collections with Adidas under the Ivy Park banner. All of these collections were immense successes and were sold out within minutes.

Apparel brand BAPE has a collaboration with Adidas’ famous ‘Superstars’ line of sneakers. BAPE’s signature military design paired with the vintage appeal of the Superstars makes this a sought after sneaker.

Luxury brand Prada has never shied away from a brand collaboration and for good reason. They have paired with Adidas multiple times in the past to release some of the most famous sneakers today.

Recently, Luxury brand Gucci took the sneaker market by storm by collaborating with Adidas to create perhaps the most famous collaboration of 2022. They created apparel as well as sneakers that created a huge buzz amongst sneakerheads. We often see brand ambassador Ranveer Singh rocking an Adidas x Gucci outfit every now and then.

The Kanye West - Yeezy partnership

However, the most famous and successful collaboration Adidas has ever done is with famous musician Kanye West.

The name given to the product of this partnership is ‘Yeezy.’ This association took Adidas as a brand to new heights. Everyone wanted a pair of Yeezy’s. Every sneaker that ever came out of this collaboration was sold out within seconds.

The Adidas Yeezy 350 series was the most popular collection. It soon became the only collaboration that could even pose competition to the mighty Jordans. The constantly increasing demand for Yeezy’s, skyrocketed the prices in the resale market.

Adidas has now announced that it will be ending its partnership with Kanye West after a long and successful tenure.

Fans of the Yeezy brand are devastated to hear that there will no longer be any new Yeezy releases.

Adidas - Yeezy brand

The after-math

Bernstein analyst Aneesha Sherman told Forbes that Adidas confirmed to her it will entirely shut down Yeezy that accounts for a “high single digit” percentage of all sales, rebranding the products as Adidas and giving a notable “haircut” to the company’s revenue into 2023.

Adidas reportedly decided to cut ties with Kanye West as a result of his anti-Semitic tirades. The PR disaster for Adidas couldn't have come at a worse time as the company's stock prices were already falling due to sluggish sales.

It was on October 6 when Adidas put its partnership with West under review after the rapper wore clothing associated with a white supremacist group at his Yeezy fashion show in Paris.

The company disclosed an estimated 2022 loss of up to $247 million just in lost sales from West’s Yeezy line. This came as a major revision just after the company slashed its profit margins for 2022 from 7% to 4% due to surplus inventory and poor sales.

Bernstein too cut its 2023 revenue forecast for Adidas by about $398 million due to the demise of Yeezy.

As a result, Adidas’ total losses after its severing of ties with West, stood at $645 million, with the $247 million loss of sales this year stated by the company and the $400 million in lost 2023 revenue forecast by Bernstein.

Adidas shares fell 5.6% to $97.96 in Frankfurt after the company announced that it would be cutting ties with West. Which means its shares are down about 15% over the last five days.

As per Forbes, Aneesha Sherman called it the “absolute right decision” for Adidas to disassociate with West as public opinion turned against the rapper, calling it the “right thing to do” long-term but noting the “toll” it takes on the company’s bottom line in the near term.

As a result of West’s little stint in Paris, luxury retailer Balenciaga, too, cut ties and ended all partnerships with the rapper. His talent agency CAA also dropped him due to all the bad publicity.

in latest news, on October 27th, Kanye West showed up at the LA office of another shoe company - Skechers unannounced and uninvited along with a film crew. As a result, he was soon escorted out of the building.

So what happens now?

It will be interesting to see how much this decision affects Adidas in the long run. However, they do not have a shortage of brands and celebrities who wish to collaborate with them.

So the real questions are, which is the next big collaboration we expect to see from Adidas? What does Kanye West’s future hold for him in the apparel and sneaker industry now that he’s losing around $220 million per year in income?

It’s not going to be a ‘Yeezy’ journey for either the rapper or Adidas going forward. It’s surely going to be interesting to track though.

First Published on Oct 27, 2022 5:22 PM