By Tim Loh
Adidas AG said it plans to make up for most lost Yeezy earnings by selling sneakers of the same design stripped of the branding from rapper and former partner Ye.
Stemming the damage from ending the lucrative line will be a key challenge for newly appointed Chief Executive Officer Bjorn Gulden when he takes over in January.
The German sportswear maker is working through options for selling the sneakers in 2023, and expects to save about €300 million ($302 million) in royalty payments and marketing fees by going it alone, Chief Financial Officer Harm Ohlmeyer told reporters Wednesday.
Adidas shares rose as much as 4%, bouncing back from earlier losses suffered after it lowered a profitability target for the fourth time this year.
Adidas terminated its partnership with Ye, formerly known as Kanye West, in late October following years of controversial behavior from the rapper and designer that culminated in a recent string of antisemitic statements.
Price Is Key
The decision to cut ties followed weeks of internal review about the partnership, and led to criticism from consumers and celebrities that it was moving too slowly. Ohlmeyer pushed back on that idea, saying the company needed to perform a “thorough review” before taking action.
In ending the arrangement, Adidas absorbed a hit to earnings of up to €250 million for the year. Yeezy has accounted for almost half of Adidas’s total profits, according to analysts.
Still, CFO Ohlmeyer said the profitability of the line is often overstated because its costs include only those directly related to Yeezy products, not all the centralized expenses that were shouldered by Adidas’s wider business network.
“Let me be clear, we own all the IP, we own all the designs, we own all the versions and new colorways,” Ohlmeyer said. “It’s our product. We do not own the Yeezy name.”
Even if Adidas does manage to sell the Yeezy shoes under its own label, some analysts have expressed doubts that it will be able to replicate one thing: the price.
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