Are Celebrity Brands Out of Style for Retailers?

Last week, Adidas and Beyoncé’s Ivy Park ended their relationship. The news followed reports of a 50% drop in revenue that emerged in February.

Despite rumors of Beyoncé’s annual salary being a whopping $20 million, the partnership between her and the company was not as successful as previously claimed. That said, while the collaboration did not meet expectations, according to The Wall Street Journal, the contract was slated to end in 2023, five years after its inception. With that, both Adidas and Beyoncé were said to have come to a mutually agreeable decision to discontinue the collaboration, according to The Hollywood Reporter.

But what does this mean for Adidas?

Too Many Breakups All at Once

The Ivy Park-Adidas breakup comes as the sportswear giant has been under the spotlight for not only reporting a big fourth-quarter loss but also for its highly publicized breakup with Kanye West, now known as Ye.

Despite being regarded by Adidas as “one of the most successful” partnerships in its history, Adidas terminated the relationship due to rapper’s antisemitic outbursts on social media. The breakup has reportedly left Adidas with about a $1.3 billion loss in revenue.

In financial guidance for 2023 released in February, the company said 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. Additionally, the company would face one-time expenses of 200 million euros (approximately $214 million) and report an operating loss of 700 million euros (approximately $748 million) for the year.

Adidas CEO Bjorn Gulden reportedly warned that donating Yeezys would backfire.

See also: Adidas Could Lose $1.3B in 2023 From Unsold Yeezy Inventory

While the relationships with Ye and Beyoncé didn’t pan out as expected, it’s worth noting the common factor in both partnerships — Adidas. More specifically, these failed collaborations shed light into a bigger issue with the brand: its heavy dependency on collaborations with various partners, such as music artists like Bad Bunny, Pharrell Williams and Beyoncé.

Nevertheless, The Wall Street Journal has reported that the Ivy Park line experienced a decline of more than 50% in sales, reaching only about $40 million in the previous year — significantly lower than Adidas’ forecast of $250 million.

Adidas has faced additional difficulties as well, recently informing investors that it expected lower profits due to a surplus of inventory and lower-than-anticipated sales. The company attributed this outlook to decreased consumer demand in major Western markets since September, as well as a further decline in traffic trends in Greater China.

Where Ivy Park Could Have Held Up Its End of the Deal

The Ivy Park founder could have done a tad bit more to encourage consumer demand. For example, while Beyoncé has been featured in promotional campaigns for Ivy Park, she has not been spotted as frequently as Kanye West was in paparazzi images for Adidas streetwear.

Per insider comments, there have been disagreements between Adidas and Beyoncé’s team regarding product labeling and marketing, with the former putting greater emphasis on Beyoncé intending to “reclaim her brand” and maintain her artistic autonomy. Meanwhile, The Wall Street Journal reported that almost half of the merchandise from five out of the six previous Ivy Park collections remained unsold.

With the singer’s decision to appear in less promotional content to support the Ivy Park brand, there’s one quick lesson that can be applied from Sephora’s decision to drop beauty brand Item Beauty by TikTok star Addison Rae, who exploded on TikTok during the pandemic, from its product lineup. One of the reasons that facilitated this decision was Addison’s inability to market her own product line effectively. This became apparent when she last featured Item Beauty on her personal Instagram feed on September 29, 2022. Her lack of promotional effort resulted in decreased consumer interest, ultimately causing a decline in the brand’s social media following and then, eventually, sales.

See also: Addison Rae’s Item Beauty Flops While Rihanna’s Fenty Beauty and Katy Perry’s De Soi Thrive

What’s Next for Adidas and Beyoncé?

For Adidas, “2023 will be a year of transition to set the base to again be a growing and profitable company,” CEO Gulden said in releasing the company’s guidance. “We will put full focus on the consumer, our athletes, our retail partners and our Adidas employees.” That said, Adidas will be looking to refocus its efforts to bring “brand heat” by 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.”

Beyoncé, on the other hand, is reportedly gearing up to kick off her highly anticipated “Renaissance World Tour” in May, slated for U.S. cities including Chicago, New York City, Boston, Atlanta, Miami, Las Vegas, Los Angeles, Houston and New Orleans. The artist has also just launched her couture collection with luxury fashion brand Balmain which dropped the same week Adidas and the singer went their separate ways.

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