Adidas expects to lose $246 million in profit by the end of the year after cutting ties with Kanye West.
The Germany sportswear company said that it had ended its partnership with Ye, including ending production of Yeezy-branded products and stopping all payments to Ye and his companies, because of his “unacceptable, hateful and dangerous” comments and actions.
Their agreement was set to expire in 2026.
“This is expected to have a short-term negative impact of up to €250 million on the company’s net income in 2022 given the high seasonality of the fourth quarter,” Adidas said.
The company reported net profit of 1.49 billion euros ($1.5 billion) in 2021.
Analysts from Baird estimated that Yeezy generated around $1.7 billion in annual revenues for Adidas. This would have been around 8% of Adidas’ total revenues of around $21.2 billion last year.
Baird said it was reducing its fourth-quarter sales estimates for Adidas by 8%, based on the assumption that less than 40% of the money that would otherwise be spent on Yeezy is still spent on other products at Adidas.
Yeezy had an operating margin of over 30%, Baird analysts estimated, because of its high price points, few discounts and promotions, and large proportion of direct-to-consumer sales.
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