Adidas Expecting First Annual Loss in Over 30 Years Due to Kanye West Fallout

The last couple of months for Kanye West and Adidas have been less than ideal.

On Wednesday morning (March 8), the German sportswear titan reported a giant loss in 2022 Q4 revenue of $763 million and a stunning projection for their 2023 year. The brand expects a $738 million full-operating loss this year, which would be its first annual loss in 31 years, according to CNBC.

This plunge for Adidas stems from the ending of its relationship with Kanye West in October 2022. After a series of antisemitic remarks, Adidas split from West and canceled his Yeezy clothing line. This reportedly left them with $1.3 billion of Yeezy inventory that they have still not decided what to do with.

On an earnings call, CEO Bjørn Gulden, who took over in January after leaving the same position at Puma, elaborated on these reports. He spoke about how the company has deliberated between a few different options in regard to handling the remaining Yeezy shoes. Whether it be selling them at original retail or for no profit, donating them fully, or destroying them, each decision has its pros and cons. Selling would bring damage to their reputation, donating would lead to them landing on the re-sale market instead of the less fortunate’s feet, and destroying/burning would cause sustainability concerns.

“If you can’t sell and you can’t destroy, what’s your option?” he said. “That’s why we haven’t made a decision on it, because it’s a very complicated issue.”

In terms of revenue, though, Gulden asserted that 2023 would be a re-stabilizing year post-Yeezy, and brighter days would be ahead in 2024.

“2023 will be a transition year to build the base for 2024 and 2025. We need to reduce inventories and lower discounts. We can then start to build a profitable business again in 2024,” he said. “Adidas has all the ingredients to be successful. But we need to put our focus back on our core: product, consumers, retail partners, and athletes. We will work on strengthening our people and the Adidas culture. Motivated people and a strong Adidas culture are the most important factors to build a unique Adidas business model again.”

Reflecting on the turmoil that lead to the loss of profit, Gulden gave a sincere remark about the last few months and the entire Yeezy era. As they look forward to fixing their problems, it’s still hard to forget what could have been.

“If you look at that business, there’s no doubt that (Kanye West) is one of the most creative people that has ever been on the planet,” he said. “I think the way this was taken to market is probably the best go-to-market job that any brand has done and it’s very sad that this is falling apart.”

Photo by Neil Mockford/GC Images