Adidas Enters Profit Slump After Split With Kanye West

Photo by Odd ANDERSEN / AFP) (Photo by ODD ANDERSEN/AFP via Getty Images

Ryan Lippe Contributor
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Shares of Adidas AG (ADDYY) dropped nearly 12 percent between Monday, Feb. 5 and Friday, Feb. 10 after the company announced that profit margins from 2022 will be significantly thinner.

The drawn out dip in value comes after the clothing brand parted ways with Kanye West in Oct. 2022 over the rapper’s antisemitic. CEO Bjørn Gulden, who oversaw a major comeback as the head of Puma, claims to have a plan for reviving Adidas, The Wall Street Journal reported.

Unsellable inventory of the rapper’s signature shoe and clothing brand, Yeezy, continues to hurt the company. Should the company choose not to repurpose the remaining stock, they could write it off and accept the 700 million euro ($749 million) operating loss for the year, Adidas announced Thursday in a press release. In addition to the decreased profit margin, investors continue to grow weary over high inflation in Europe and the United States.

Adidas plans to announce its report for fiscal year 2022 on March 8.

HOLLYWOOD, CA – JUNE 28: Kanye West at Milk Studios on June 28, 2016 in Hollywood, California. adidas and Kanye West announce the future of their partnership: adidas + KANYE WEST (Photo by Jonathan Leibson/Getty Images for ADIDAS)

Gulden, who took over Adidas in November, takes the reins at a crucial time in the company’s history. The Yeezy brand made up $1.8 billion, or seven percent, of Adidas’ total revenue in 2022, according to a report from the Financial Times. “2023 will be a year of transition to set the base to again be a growing and profitable company,” Gulden said. (RELATED:Media, Dems Attack Kanye West Over Mental Health Issues)

Following the split with the Yeezy brand, Adidas continues to look for ways to remain competitive in athletics with the development of NIL (Name, Image, and Likeness) in college sports. Despite Adidas being the first to implement an NIL program, Nike has had more success signing young athletes like Bronny James.

Adidas’ signature line with hip hop icon Beyoncé has also underperformed, according to the Journal, with profits for her clothing line, Ivy Park, down 50 percent in 2022.