Adidas’ choice to part ways with Kanye West may have increased its popularity among the general public, but it seems to have had other unfavorable effects. The company has revealed lower earnings expectations for the year than had previously been published, according to Billboard.
On October 25, Adidas severed its relationship with West and stopped producing all Yeezy merchandise in addition to paying him royalties. The business reported that its anticipated net profit from continuing operations fell from $500 million to 250 million euros ($252 million USD).
The projection conflicts with the recent statement made by Adidas CFO Harm Ohlmeyer that the impact of the Yeezy brand on Adidas’ rise to success was “overstated,” even though those numbers are consistent with earlier reports that their breakup with West would cost the brand a quarter of a billion in profits.
According to CFO Harm Ohlmeyer, the firm will largely offset the effects of the split by not having to pay royalties and marketing expenses for the brand in 2019. The boss has added that the split won’t affect Adidas in the long run after 2023.
“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 benefiting from and that was essential for its success,” Ohlmeyer reasoned. “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,” he said.
Adidas continues to control the product designs connected to the Yeezy brand even though their business connection with Ye is over, but they do not own the name. Financial analysts estimate that up to 15% of Adidas’ overall net profitability was attributable to West and the Yeezy brand. However, the breakup has negatively impacted both sides because West is no longer a billionaire as a result of the end of his association with Adidas, according to Forbes.
