Adidas Faces Profit Loss After Cutting Ties With Yeezy | Entrepreneur

Adidas saw its net profit fall by 83%, from 2021 to 2022, after a difficult year for the company including dropping its partnership with Ye, the rapper formerly known as Kanye West, as The Wall Street Journal reported.

Yeezy merchandise drops would typically sell out in minutes.

The company’s chief financial officer, Harm Ohlmeyer, attributed the losses to a few factors. The end of the Yeezy deal, the company closed its stores in Russia after it invaded Ukraine in early 2022, and a sales drop of 36% in China, attributed to Covid lockdowns there.

“If you lose three profit pools in one year, that leaves some marks,” Ohlmeyer said in an earnings call Wednesday.

Adidas also has an inventory glut of $6 billion after over-ordering during pandemic supply chain disruptions, which has now led to merchandise discounts to improve inventory movement, Adidas’ new CEO, Bjørn Gulden, said on the call, per the WSJ.

Gulden added the company plans to order millions less in inventory this year to improve the situation.

The Germany-based shoe and apparel company had a partnership with Ye for nearly 10 years. After the rapper made anti-semitic remarks in October 2022, Adidas dropped their deal. Several other companies including Gap, Balenciaga, and Foot Locker also cut ties.

“Ye’s recent comments and actions have been unacceptable, hateful and dangerous, and they violate the company’s values of diversity and inclusion, mutual respect and fairness,” Adidas said in a statement at the time.

Yeezy was responsible for about 8% of the company’s total sales in 2021, CNN reported. On the call, Gulden said the company had not yet decided what to do with unsold Yeezy merchandise but that it could sell it “at cost,” or with a smaller or larger profit “for different donations.”

“2023 will be a transition year to build the base for 2024 and 2025,” Gulden also said of the company’s earnings.