Adidas’ Reported Lower Earnings Projection After Terminating Business With Ye’s Yeezy Brand
With the loss of the Yeezy name, adidas has lowered its sales projections due to the elimination of Ye’s sneakers.
Adidas stated that due to the “termination of the adidas Yeezy partnership,” the previous projections have been altered to be lower than anticipated.
“Following the decision on October 25, 2022, to terminate the Adidas Yeezy partnership, adidas now incorporates the related top- and bottom-line impact into its guidance for FY 2022, reflecting the high seasonality of the adidas Yeezy business geared towards the fourth quarter. Consequently, adidas now expects currency-neutral revenues for the company to grow at a low-single-digit rate in 2022.
Billboard reported that the company cut its expectations by 50% for net profit from continuing operations to 250 million euros ($252 million) this year from a previously expected 500 million euros ($504 million).
In a conference call, adidas CFO Harm Ohlmeyer stated that the profit margin of the Yeezy brand was overstated because the costs solely included the expenses that were directly related to the items from the brand. It didn’t include the central overhead costs from adidas.
“In other words, it does not include any further central cost allocation for sourcing, digital, retail, or any other services that this part of our business has been benefitting from and that were essential for its success,” Ohlmeyer said. “At the same time, we will save around 300 million euros related to royalties and marketing fees; in combination, this will help us to compensate the majority of the top and bottom line impact in 2023.”
“After a thorough review, the company has taken the decision to terminate the partnership with Ye immediately, end production of Yeezy branded products and stop all payments to Ye and his companies. Adidas will stop the Adidas Yeezy business with immediate effect.”
When Ye appeared on the since-deleted Drink Champs podcast on Revolt, he practically dared the apparel company to act when he stated, “I can say anti-Semitic things, and Adidas can’t drop me. Now what?”