When Adidas and Kanye West started their partnership in 2013, there was little to suggest that the Yeezy brand would become as successful and profitable as it is today.
With estimated annual sales of $1.8 billion representing 7 percent of Adidas revenue, according to the New York Post newspaper, the split from Ye – as Kanye West calls himself – is a major loss. In the remaining time of 2022, the end of the cooperation will result in a loss of up to 250 million euros, Adidas announced on Tuesday. Also, Adidas shares are at their lowest since 2016.
A unique partnership
The Adidas and Ye partnership was unique in terms of collaboration between a non-sporting celebrity and a global sportswear brand. The level of revenue and hype around the items is comparable to Nike’s deal with Michael Jordan, but no other brand alliance.
Adidas has now lost a sizeable source of profits to replace at a time when the company’s sales are declining and inflation is affecting all aspects of the business. The German sporting goods giant’s financial challenges have already caused the company to downgrade its outlook. A new CEO is also being sought internally as Kasper Rørsted will step down from his post in 2023.
Adidas has not disclosed the terms of the Yeezy deal’s termination, but it is believed that Ye is the majority owner, with Adidas handling production and distribution and owning the design rights to the released products. With the shopping and manufacturing of the SS23 collection already in full swing, Adidas might have reserved the right to release future products. In a statement, Adidas stated that it is “the sole owner of all design rights to existing products, as well as previous and new colorways as part of the partnership.”
As for retail, Yeezy has consistently enjoyed high demand that exceeded inventory, resulting in an equally large premium to the resale value of the sneakers. They had an “it” status that never let up – until now. According to data from Aldan Insights, the new colorways, which will be launched in November and December, will show how big the consumer appetite for Yeezy is since the breakup of the Adidas cooperation. Either way, the lucrative business deal will be a loss for both parties.
This translated and edited post previously appeared on FashionUnited.uk.