Adidas Says Dropping Kanye West Could Cause Over $1 Billion Loss

(VINnews) — Adidas reportedly expects to lose over a billion dollars due to unsold Kanye West merchandise, much more than initially expected when the company severed its massive deal.

The company said last week that it expects to lose $1.3 billion in revenue this year because it’s unable to sell the designer’s “Yeezy” clothing and shoes.

In a statement, Adidas said its financial guidance for 2023 “accounts for the significant adverse impact from not selling the existing stock.” If the company can’t repurpose any of the remaining Ye clothing, Adidas said that could cost the company $536 million in operating profit this year.

The company said shortly after the partnership was dissolved that it would try to sell the clothing without Yeezy name and branding, which would save about $300 million in royalty payments and marketing fees.

However it now seems the company is left with $1.3 billion in unsellable Kanye merchandise that it will have to write off as a loss in the aftermath of severing its business ties with West.

The massive apparel company terminated its relationship with the disgraced antisemitic rapper in late 2022. They projected a loss of $246 million at the time, but emphasized it was making the right decision to “not tolerate” antisemitism and hate, according to Fortune magazine.

It turns out their financial sacrifice was far more than they expected. After quickly shutting down production of “Yeezy” products, the brand is still left with a massive stockpile of Yeezy inventory.

According to a new financial document from the company, it has lowered predicted revenues by $1.3 billion and operating profit by $536 million for 2023, which would place operating profit at near zero.

In response to the announcement, Adidas shares dropped 11% on Friday morning.

“The numbers speak for themselves,” said CEO Bjørn Gulden, according to Fortune. “2023 will be a year of transition to set the base to again be a growing and profitable company. We will put full focus on the consumer, our athletes, our retail partners and our adidas employees. Adidas has all the ingredients to be successful: A great brand, great people, fantastic partners and a global infrastructure second to none.”

He added: “We need to put the pieces back together again but I am convinced that over time we will make Adidas shine again. But we need some time.”