The break with Kanye West costs Adidas dearly: 2023 in the red and 70% cut in the dividend

Testimonials are a double-edged sword for big brands. Sometimes they allow the leap in quality – think of the success of the combination between Michael Jordan and Nike. Other times they cause enormous image and economic damage.

This is the case of Adidas and Kanye West. The German clothing company had started a collaboration with the American rapper and stylist. The Yeezy shoes were born, capable of generating sales of over one billion euros, about 7% of the group’s total turnover.

In October 2022, however, West’s anti-Semitic positions prompted Adidas to terminate the contract with the artist. However, preserving the company’s reputation comes at a cost: Adidas has warned that in 2023 it could record its first loss in 31 years, currently estimated at a maximum of 700 million.

The divorce from Kanye West in fact canceled 600 million in revenues in the fourth quarter of 2022 and, according to analysts, could reduce Adidas’ turnover by 1.3 billion in 2023. The rapper then left a bunch of Yeezy. The CEO, Björn Gulden, is still considering what to do with it.

Burning them would have a significant environmental impact, the former Puma manager said. Donating them could trigger a hoarding race because Yeezy prices are on the rise on the secondary market (from 260 to 360 dollars in four months).

The most likely option is that Adidas donates the proceeds from the sale of the thousands of Ye-designer shoes left in stock to charity. In any case, the disposal of the Yeezys will cause the company an estimated loss of 500 million dollars.

Added to the Yeezy flop are the difficulties of Adidas in China, for a long time a driving market and today more and more stagnant. Consequently, the German company has decided to cut the dividend by 70%, which will go from the 3.3 euros detached in 2002 to the 70 cents proposed by the board for 2023. It goes without saying that the shareholders did not like it: Adidas shares in the red by 2%.