Shares of Adidas (ADDYY) slumped in morning trading on Friday after the shoes and clothing giant warned of an adverse impact on its bottom line after terminating its relationship with rapper Kanye West.
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The company warned that its decision to not sell its existing stock of West’s brand Yeezy is likely to drag down its revenues by around €1.2 billion and slash its operating profits by approximately €500 million this year. As a result, Adidas’s FY23 sales are likely to fall by a “high-single-digit rate” while operating profit is expected to be “around the break-even level.”
Moreover, the company expects to incur one-off costs of up to €200 million in 2023 related to the Yeezy product line.
As Adidas CEO Bjørn Gulden put it bluntly, “The numbers speak for themselves. We are currently not performing the way we should. 2023 will be a year of transition to set the base to again be a growing and profitable company.”
The company terminated its contract with the rapper late last year after a series of antisemitic tweets by West that triggered widespread outrage.
Adidas stated, “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.”
Adidas stock has plunged by more than 35% in the past year.
