Adidas’ breakup with Ye could lead to a revenue loss of 1.2 billion euros (about $1.3 billion) in 2023.
The sportswear company said in a Thursday (Feb. 9) financial guidance for 2023 that while it is deciding what to do with its Yeezy inventory, not selling it would lower operating profit by 500 million euros (about $534 million) and result in a break-even operating profit.
Should Adidas decide to not repurpose any of the existing Yeezy inventory, its operating profit would be lowered by another 500 million euros this year, it would incur one-off costs of 200 million euros (about $214 million), and it would report an operating loss of 700 million euros (about $748 million) for the year.
“2023 will be a year of transition to set the base to again be a growing and profitable company,” Adidas CEO Bjorn Gulden said in the guidance. “We will put full focus on the consumer, our athletes, our retail partners and our Adidas employees.”
Adidas ended its partnership with Ye, the musician-turned-fashion entrepreneur formerly known as Kanye West, on Oct. 25, citing widely reported controversies around Ye. It also terminated production of Yeezy branded products.
The partnership had already been in question, as Adidas had been in disputes with West, who had already ended a deal with Gap after having conflicts with that apparel maker.
When Adidas placed the partnership in review because of the disputes, the company noted that it was “one of the most successful” in its history.
The company has faced other challenges as well, telling investors Oct. 21 — days before ending the partnership with Yeezy — that it was projecting its profits would be lower due to lower-than-expected sales and a glut of inventory.
Adidas said at the time that its outlook was based on “a further deterioration of traffic trends in Greater China as well as a significant inventory build-up as a result of lower consumer demand in major Western markets since the beginning of September.”
Gulden said in the Feb. 9 financial guidance that Adidas will now focus on creating “brand heat,” developing products and improving its distribution.
“We need to put the pieces back together again, but I am convinced that over time we will make Adidas shine again,” Gulden said. “But we need some time.”
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