Adidas’s moveHis anti-Semitic remarks raise questions about the future of one of the world’s most coveted and commercially valuable sneakers.
In the short term, the sudden split effectively ended production of all Yeezy products by the German sportswear giant, causing a significant financial blow to Adidas. Yeezy accounts for about 10% of the company’s annual revenue, while Adidas said ending its deal with Yeezy would take a $246 million hit to its bottom line this year alone.
Going forward, Adidas may continue to release new shoe designs that highlight Yeezy’s brand – minus the label. The company announced the demise of its partnership with Ye, formerly known as Kanye West, on Tuesday, saying that it retains the design rights to any new colorways.
“The press release implies that Adidas plans to release some existing Yeezy designs without the Yeezy name,” Morningstar equity analyst David Swartz told CBS MoneyWatch. “I don’t think the design process meant all Yeezy shoes, but it could mean the ones that have been released in new colors so far.”
While Adidas may still have some Yeezy products in the rebranding pipeline, the impact on its business will be significant.
“They have shoes in various stages of planning and production that haven’t already been released. Destroying that inventory would be extremely costly and wasteful,” Swartz said. “It’s an unlikely scenario, but I’m not sure what will be done with a product that hasn’t been released. But it looks like Adidas has some plans to release some Yeezy products under its own name.”
For its part, Ye has previously indicated that it wants to exit the partnership, saying it wants to take control of its brand and sell products directly to consumers. He will continue to be the owner of Yeezy, which he launched in 2016, as well as control the trademark for the brand. But West could face a legal challenge if it tried to resell already existing designs from the Yeezy line for Adidas.
“He cannot resell designs for which royalties have already been paid to him by Adidas,” Swartz said. “They gave him big money, and they won’t let him take and sell his property. If it ends up in court, Adidas will have a stronger case.”
Surely, Adidas will survive. Analysts note that Yeezy products represent only a tiny fraction of the approximately 300 million pairs of shoes the company sells each year. But the dissolution of its deal with Yeh adds another hurdle to the company already facing several challenges.
Amid those issues, Adidas CEO Casper Rorstedt is set to exit the company, and it’s unclear who will take over in 2023. Adidas’ China sales are also down as the lockdown to control COVID-19 has led to the closure of stores which is a significant one. Market. And seasonal products arrived too late due to shipping challenges, forcing the company to slash prices to clear shelves.
“They couldn’t sell stuff because the stores kept closing, so they’re sending adidas back to stuff and the company is flooded with stuff they can’t sell,” Swartz said.