Adidas cuts earnings guidance amid Kanye West fallout

Adidas lowered its full-year earnings guidance on Wednesday and said the Yeezy split is likely to impact its bottom line during the important holiday shopping season.

Investors and footwear enthusiasts were expected to closely follow Adidas’ earnings release, in which the company was to provide new details on the fallout from ending his relationship with Ye, the rapper formerly known as Kanye West.

Adidas ended the partnership last month over Ye’s hate speech and actions, and in a statement last month estimated the move would cost the company up to $246 million in profits this year.

The company said on Wednesday it had lowered its full-year operating margin guidance to 2.5%, down from the 4% margin it was targeting before Yeezy’s cancellation in October.

“Following the decision of October 25, 2022 to end the partnership with adidas Yeezy, adidas is now including the related revenue and earnings impact in its full year 2022 guidance, reflecting the strong seasonality of the adidas Yeezy business, which is based on the fourth quarter is aligned,” the company said in a statement.

The company stopped producing all Adidas Yeezy products and stopped making payments to Ye, the statement further said.

However, the exact plans for the dissolution of the agreement are not yet known. Adidas declined to respond to a request for comment.

Adidas, a German company, has faced increasing pressure to sever ties with Ye over the past month after the rapper made anti-Semitic comments on Twitter, podcasts and in interviews.

Ye also fueled controversy last month after appearing at a surprise show in Paris wearing a T-shirt that read “White Lives Matter,” which the Anti-Defamation League has labeled hate speech and has been promoted by white supremacist groups.

“Adidas does not condone anti-Semitism or any other type of hate speech,” the company said in a statement last month after the partnership ended.

“Yes’ recent comments and actions have been unacceptable, hateful and dangerous, and violate the company’s values ​​of diversity and inclusion, mutual respect and fairness,” the statement added.

PHOTO: Bjoern Gulden, CEO of Puma, shows a shoe as the sports retailer presents its sportswear collection in collaboration with Porsche Design, in Berlin, Germany, February 21, 2019.

Puma Chief Executive Bjoern Gulden displays a shoe as the sports retailer presents its sportswear collection in collaboration with Porsche Design, February 21, 2019 in Berlin, Germany.

Annegret Hilse/Reuters, FILE

Last year, Yeezy was valued at between $3.2 billion and $4.7 billion by Swiss investment bank UBS, Bloomberg reported.

According to Evercore ISI analyst Omar Saad, the Yeezy line accounts for about $1 billion to $2 billion in annual sales for Adidas.

Clothing retailer Gap, which also had a partnership with Yeezy, ended that agreement in September, the company said in a statement last month, adding that it took immediate steps to remove Yeezy Gap products from its stores.

The announcement of the quarterly results comes a day after the appointment of CEO Bjørn Gulden, the former CEO of rival Puma, on Tuesday. Gulden, who will take over in January, replaces Kasper Rorsted, adidas CEO since 2016.

Gulden previously worked as senior vice president of apparel and accessories at Adidas in the 1990s.

“We are very pleased to welcome Bjørn Gulden back to adidas,” said Thomas Rabe, adidas chairman of the board, in a statement on Tuesday.

At the close in Frankfurt on Tuesday, shares in Adidas were up more than 4%.

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