On October 25, local time, Adidas issued a statement saying that Adidas cannot tolerate anti-Semitism and any other type of hate speech. Due to Kanye West’s recent anti-Semitic remarks and behavior, it has decided to immediately terminate its partnership and stop production. For Yeezy branded products, Adidas will immediately discontinue the Adidas Yeezy business.
Given the high seasonality in the fourth quarter, this is expected to have a short-term negative impact of up to 250 million euros on the company’s net profit in 2022, the statement said.
At the same time, existing investment institutions have downgraded Adidas’ rating based on the breakdown of cooperation. It can be said that Adidas’ move is to cut down a “cash tree”.
Yeezy brand products are known as “Yeezy shoes” in China and are designed by American rapper and fashion designer Kanye West. Yeezy series is undoubtedly Kanye’s most proud work. Yeezy shoes are very popular all over the world. According to Bloomberg, the current valuation of the Yeezy brand by the investment community is about $4 billion.
At first, Kanye reached a cooperation with the sports brand Nike to launch the Air Yeezy series of joint sneakers. In 2013, he switched to Adidas. In 2016, Adidas and Kanye signed a deal to produce and distribute his Yeezy line, which didn’t expire until 2026, according to the original agreement.
Adidas has also previously said the partnership has had a “huge impact” on its business and is one of the most successful in the history of the industry.
The Yeezy brand brings in nearly $2 billion a year, or about 10 percent of its revenue, said David Swartz, an analyst at investment firm Morningstar. “It’s been an important product line for Adidas and has helped reinvigorate its North American business,” Swartz said in an interview with CNBC. “It’s hard for Adidas to compete with Nike for top sponsorship, and Yeezy is A big advantage for Adi.”
Notably, Adidas wrote at the end of the aforementioned announcement, “Adidas is the sole owner of all design rights for existing products and previous and new colorways under the partnership.”
In this regard, CNN concluded after interviewing multiple legal experts that although Adidas’ statement clearly stopped selling Yeezy-branded products, Adidas may rename existing Yeezy designs. In short, “Yeezy” may be owned by Kanye, but the Yeezy shoe design is the intellectual property of Adidas.
Adidas’ second-quarter 2022 financial report shows that the company’s second-quarter net sales were 5.596 billion euros, a year-on-year increase of 10.2% from 5.077 billion euros in the same period last year; net profit was 309 million euros, down 24.2% year-on-year. Among them, the Greater China region continued the downward trend of performance in the first quarter, and fell again by 35% in the second quarter.