Adidas’ decision to part ways with Kanye West may have boosted their public approval rating, but appears to have had other negative impacts. According to Billboard, the brand has revealed lower earnings projections for the year than previously reported
Adidas cut ties with West on Oct. 25 and halted production of all Yeezy products, as well as his royalty payments. The company announced that its net profit from continuing operations has dropped from an expected $500 million euros to 250 million euros ($252 million USD). While those figures align with earlier reports that their split with West would cost the brand a quarter-billion in profits, the projection is in conflict with Adidas CFO Harm Ohlmeyer’s recent claim that the impact of the Yeezy brand on Adidas’ uptick in success was “overstated.”
The company will largely offset the impact of the breakup next year by no longer having to pay royalties and marketing fees for the brand, CFO Harm Ohlmeyer said. The executive has also argued that the split will not have long-term ramifications on Adidas beyond 2023. “It does not include any further central cost allocation for sourcing, digital, retail, or any other services that this part of our business has been benefitting from and that were essential for its success,” Ohlmeyer reasoned. “At the same time, we will save around 300 million euros related to royalties and marketing fees; in combination, this will help us to compensate the majority of the top and bottom line impact in 2023,” he said.
Despite ending their business relationship with Ye, Adidas retains ownership of product designs associated with the Yeezy brand, but do not own the name. According to financial analysts, West and the Yeezy brand were responsible for up to 15% of Adidas’ total net income. However, the split has affected both parties aversely, as West is no longer a billionaire following the termination of his partnership with Adidas, Forbes reports.