Adidas’s decision to part ways with Ye, the rapper formerly known as Kanye West, and his Yeezy partnership has cut its 2022 earnings forecast in half.
The sportswear company announced Wednesday that its net income for 2022 dropped to $251 million from nearly $503 million, a forecast given just five days before Adidas terminated its Yeezy partnership.
Adidas cut ties with West, who is now known as Ye, on Oct. 25 following his antisemitic and offensive remarks made on Twitter.
‘MORE SEVERE THAN ANTICIPATED’: ADIDAS’S SPLIT WITH KANYE WEST BRINGS HIRING FREEZE
The company stated that its reduction of the forecast of earnings was “due to negative tax implications in the third quarter related to the company’s decision to terminate the adidas Yeezy partnership,” in addition to the “high seasonality of the Adidas-Yeezy business geared towards the fourth quarter.”
Adidas also noted that slower consumer demand in Western markets, along with its decision to wind down operations in Russia, affected the earnings forecast.
Following its announcement of cutting ties with Ye, Adidas implemented a hiring freeze to deal with the financial impact of ending the Yeezy brand.
At the time, Morningstar retail equity analyst David Swartz suggested that the impact of Adidas’s decision could be “more severe.”
“The impact of this move will be more severe than anticipated as Adidas has ended production of all Yeezy products and ceased royalty payments,” Swartz said, estimating products associated with the Yeezy brand have the potential to earn 10%-15% more of its net income.
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Amid the losses, Adidas announced Bjorn Gulden, CEO of rival sportswear company Puma, would become its new chief when current CEO Kasper Rorsted steps down in January.
