Adidas’ breakup with Ye drives lower earnings outlook

Nov 8, 2022, 10:36 AM | Updated: Nov 9, 2022, 4:59 am
A store manager points out Yeezy shoes made by Adidas that are displayed inside cases at Addict sho...

A store manager points out Yeezy shoes made by Adidas that are displayed inside cases at Addict shoe store in Brickell City Center in Miami, Tuesday, Oct. 25, 2022. (AP Photo/Rebecca Blackwell).

(AP Photo/Rebecca Blackwell)

FRANKFURT, Germany (AP) — Adidas on Wednesday lowered its earnings forecast for the year to account for losses from ending its partnership with the rapper formerly known as Kanye West over his antisemitic remarks.

The German shoe and sportswear maker cut its sales and profit outlook for the year as part of its third-quarter earnings statement, even as the company’s chief financial officer said the profitability of the Yeezy shoe collaboration with Ye had been “overstated.” The company would 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 company halved its expectations for net profit from continuing operations to 250 million euros ($252 million) this year from 500 million euros. That matched its earlier statement that ending the partnership with Ye would cost it 250 million euros in profits.

Adidas also lowered its revenue forecast for the year to a low single-digit increase from a mid-single-digit increase.

The Oct. 25 split with Ye, with production of all Yeezy products halted and royalty payments ended, will leave Adidas searching for another star to help it compete with ever-larger rival Nike. Adidas also is facing internal upheaval, with its CEO Kasper Rorsted stepping down Friday. He was previously expected to hand over next year, but the company announced the quicker change on Tuesday as it named Puma CEO Bjørn Gulden as his replacement.

Adidas faced pressure to split with Ye as other brands did earlier over the rapper’s antisemitic comments in interviews and social media, including a Twitter post earlier this month that he would soon go “death con 3 on JEWISH PEOPLE,” an apparent reference to the U.S. defense readiness condition scale known as DEFCON. He was suspended from both Twitter and Instagram.

Adidas owns the rights to product designs except for the Yeezy name and is developing plans for what to do with existing inventory.

Ohlmeyer said on a conference call with reporters that the profitability of the Yeezy business had been overstated because its costs only included expenses directly related to the products and not central overhead costs borne by the company.

“In other words, 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 said.

“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.

The Yeezy brand accounted for up to 15% of Adidas’ net income, Morningstar analyst David Swartz said in a note Oct. 26.

The company had already cut its full-year earnings forecasts five days before announcing its split with Ye. The earlier outlook revision cited slowing activity in China, where severe restrictions aimed at limiting the spread of COVID-19 have held back the economy, and clearance of elevated inventory levels.

Net income for the third quarter from continuing operations was 66 million euros, down from 479 million euros in the same quarter a year ago.

The decrease largely reflected 300 million euros in one-time costs, the majority of it from winding down the company’s business in Russia.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Associated Press

Suspect arrested in fatal shooting at Houston home

AUSTIN, Texas (AP) — A 38-year-old man has been arrested in connection to a Thanksgiving day shooting at a Houston-area home that left two people dead and two wounded, according to the Houston Police Department. A man believed to be a former spouse of one of the victims entered the home through the back door […]
1 day ago
FILE - A Zimbabwe National Parks official inspects some of the elephant tusks during a tour of ivor...
Associated Press

Wildlife conference boosts protection for sharks, turtles

PANAMA CITY (AP) — An international wildlife conference moved to enact some of the most significant protection for shark species targeted in the fin trade and scores of turtles, lizards and frogs whose numbers are being decimated by the pet trade. The Convention on International Trade in Endangered Species of Wild Fauna and Flora, known […]
1 day ago
Associated Press

NYPD officers, bystander save man who fell subway tracks

NEW YORK (AP) — Two New York City police officers and a bystander raced to save a man who fell on the tracks at a Manhattan subway station, plucking him out of the way of an oncoming train in a daring rescue captured by an officer’s body camera. The incident happened around 4 p.m. Thursday […]
1 day ago
FILE - This Oct. 3, 2016, photo, provided by the Martin County Sheriff's Office, shows Austin Harro...
Associated Press

Judge to decide on Florida face-biter insanity plea

FORT LAUDERDALE, Fla. (AP) — A former college student who randomly killed a Florida couple in their garage six years ago and then chewed on one victim’s face finally goes on trial Monday, with a judge deciding whether he goes to prison for life or to a mental hospital. Austin Harrouff, 25, has pleaded not […]
1 day ago
Associated Press

‘Fame’ and ‘Flashdance’ singer-actor Irene Cara dies at 63

NEW YORK (AP) — Oscar, Golden Globe and two-time Grammy winning singer-actress Irene Cara, who starred and sang the title cut from the 1980 hit movie “Fame” and then belted out the era-defining hit “Flashdance … What a Feeling” from 1983’s “Flashdance,” has died. She was 63. Her publicist, Judith A. Moose, announced the news […]
1 day ago
Associated Press

Ble Goude returns to Ivory Coast after 11 years in exile

ABIDJAN, Ivory Coast (AP) — Former Youth Minister Charles Ble Goude, who was acquitted of crimes at the International Criminal Court, returned home Saturday to Ivory Coast after more than a decade of exile. He arrived in Abidjan on a commercial flight and made no comment at the airport, which was heavily guarded by police. […]
1 day ago

Sponsored Articles

SHIBA WA...

Medicare open enrollment is here and SHIBA can help!

The SHIBA program – part of the Office of the Insurance Commissioner – is ready to help with your Medicare open enrollment decisions.
Lake Washington Windows...

Choosing Best Windows for Your Home

Lake Washington Windows and Doors is a local window dealer offering the exclusive Leak Armor installation.
Anacortes Christmas Tree...

Come one, come all! Food, Drink, and Coastal Christmas – Anacortes has it all!

Come celebrate Anacortes’ 11th annual Bier on the Pier! Bier on the Pier takes place on October 7th and 8th and features local ciders, food trucks and live music - not to mention the beautiful views of the Guemes Channel and backdrop of downtown Anacortes.
Swedish Cyberknife Treatment...

The revolutionary treatment of Swedish CyberKnife provides better quality of life for majority of patients

There are a wide variety of treatments options available for men with prostate cancer. One of the most technologically advanced treatment options in the Pacific Northwest is Stereotactic Body Radiation Therapy using the CyberKnife platform at Swedish Medical Center.
Work at Zum Services...

Seattle Public Schools announces three-year contract with Zum

Seattle Public Schools just announced a three-year contract with a brand-new company to the Pacific Northwest to assist with their student transportation: Zum.
Swedish Cyberknife 900x506...

June is Men’s Health Month: Here’s Why It’s Important To Speak About Your Health

According to the Centers for Disease Control and Prevention, men in the United States, on average, die five years earlier than women.
Adidas’ breakup with Ye drives lower earnings outlook