Adidas this morning announced that it has ended its commercial partnership with rapper/designer Ye, aka Kanye West, following his recent anti-Semitic comments.
“Adidas does not tolerate antisemitism and any other sort of hate speech,” the company said in a statement released Tuesday morning, “Ye’s recent comments and actions have been unacceptable, hateful and dangerous, and they violate the company’s values of diversity and inclusion, mutual respect and fairness.”
The company said it made the decision to “terminate the partnership, end production of Ye’s Yeezy-branded products, and stop all payments to Ye and his companies” after "a thorough review."
It noted that Adidas is “the sole owner of all design rights to existing products as well as previous and new colorways under the partnership,” but acknowledged that the partnership’s end “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.”
The short-term impact could be the proverbial tip of the iceberg, given Ye’s influence as the Yeezy's creator/design chief and his persona's importance to the Adidas brand.
Ye’s Yeezy 350 v2 sneaker and other branded products drove the company’s dramatic turnaround within three years of their 2013 deal, enabling the company to recapture second place in the sportswear market from Under Armour.
Today, Adidas generates an estimated $2 billion, or 10% of its $20-billion annual revenues, from the Yeezy label.
Those realities have made it extremely problematic for Adidas to consider cutting the cord with West/Ye.
JPMorgan, Balenciaga and talent agency Creative Artists Agency all cut ties with Ye soon after his latest anti-Semitic screeds — which included a threat to go “death con 3 on JEWISH PEOPLE.” In addition, both Twitter and Instagram suspended him, causing Ye to strike a deal to buy the right-wing social platform Parler.
But Adidas had continued to say the Ye matter was “under review.” The final straw may have been the furor on social media and mounting calls for Adidas to drop Ye after a banner was hung over a Los Angeles freeway this past Saturday, allegedly by an anti-Semitic hate group, declaring that “Kanye is right about the Jews.” A number of celebrities and local politicians joined the calls for action.
Adidas has grappled with several difficult, West-generated episodes over the years, but has ignored or attempted to shrug them off. For example, in 2018, when then-West declared that slavery was “a choice,” Adidas CEO Kasper Rorsted said that “there clearly are some comments we don’t support,” but acknowledged that West was “a very important part of [Adidas’] strategy” and “a fantastic creator.”
Adidas said it that it will provide more specifics about the impacts of breaking ties with Ye during its third-quarter earnings call on Nov. 9.
But the timing of what was always going to be a financially traumatic development comes at a particularly difficult time.
The Ye-Adidas partnership success “was not born from mere halo-effect marketing, but rather from carefully curated design strategy,” sums up Fast Company's Mark Wilson. "Yeezy generated a line of iconic shoe silhouettes in limited colorways, and the designs were coveted by a world gone sneakerhead. To do so, Ye worked with a slew of incredible talents within his own studio."
“At the moment, Adidas simply hasn’t demonstrated that it has a post-Yeezy point of view, nor does it have an immediate option to fill the $2 billion hole that would be left without Yeezy (assuming sales stay high as Ye’s public opinion tanks — an uncertainty given that some Yeezy Gap items have already gone on sale),” Wilson adds. “This hole is a pressing issue, as just like Nike and its competitors, Adidas is already facing the financial consequences of a slowing economy and is sitting on large amounts of excess inventory.”