Adidas x Kanye West drama history explored as Adidas claims they will lose more than $700 for unsold Yeezy

On May 5th, Adidas released its financial report for first quater of 2023 and there the brand stated Yeezy discontinuation will widely impact the company and can cause lose of more than $700.

The sportswear brand has terminated its partnership with Kanye West, also known as Ye, with immediate effect. The decision was made due to his recent antisemitic remarks, which the brand deemed "unacceptable, hateful and dangerous" and a violation of the company's values of diversity and inclusion, mutual respect, and fairness.

Sales and production of Yeezy branded products have stopped, as well as payments to Ye and his companies. Gap and Foot Locker have also removed Yeezy products from their stores. The loss of the Adidas partnership cost Ye his billionaire status. And the active sportswear brand may face loss of $770 in 2023 financial year.

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The loss of Yeezy is hurting Adidas's financial status including 9% decrement in sales growth

According to the Financial report of Adidas for the first quater of 2023, The higher supply chain costs, inventory allowances, higher discounting, unfavourable Yeezy effect, and negative FX moves all contributed to the gross margin falling 5.1 percentage points to 44.8%.

The report stated,

"Should the company irrevocably decide not to repurpose any of the existing Yeezy product going forward, this would result in the potential write-off of the existing Yeezy inventory and would lower the company’s operating profit by an additional € 500 million this year. In addition, adidas expects one-off costs of up to € 200 million in 2023. These costs are part of the company’s ongoing strategic review aimed at reigniting profitable growth as of 2024. If all these effects were to materialize, the company expects to report an operating loss of € 700 million in 2023."

Revenues in the first quarter of 2023 were flat when compared to the same period the previous year. As part of its efforts to lower excessive inventory levels, notably in North America and Greater China, the business considerably curtailed sell-in to the wholesale channel in the first quarter, which had a negative impact on top-line growth.

Further, the Yeezy business's closure hurt on top-line growth during the quarter, reflecting a negative of about €400 million on the compared to the previous comparison, concentrated mostly in Greater China, North America, and EMEA.

The collaboration between Adidas and Kanye West's Yeezy brand had been a huge success, with many people loving the unique and stylish sneakers that have resulted from this partnership. The Yeezy line became incredibly popular, with fans of Kanye West, sneakerheads, and fashion enthusiasts alike clamoring for each new release.

But with the end of collaboration, fans are quite dissapointed and the sneaker brand is struggeling with the sales decline. After the end of the partnership, the sneaker brand has a huge pile of Yeezy at their store which needs to be sold. In addition to the financial loss, low sale of the products, Adidas hasn't decided yet what to do with the Yeezy shoes. The brand may give them away for charity causes, however, its not officially declared by the sneaker label.