Adidas expects to lose more money than a billion dollars due to unsold Kanye West merchandise—much more than anticipated when it ended its significant contract.
Due to the inability to sell the designer’s “Yeezy” clothes and shoes, the corporation predicted last week that it would lose $1.3 billion in revenue this year.
If the firm can’t repurpose any of the remaining Ye apparel, Adidas said that could lose the company $536 million in operating profit this year.
Adidas said its financial estimate for 2023 “accounts for the large adverse impact from not selling the existing stock.”
The business announced immediately after the dissolution of the relationship that it would attempt to sell the apparel without the Yeezy name and branding, saving around $300 million in royalties and marketing costs.
However, it appears that after breaking its business relations with West, the corporation is left with $1.3 billion worth of unsellable Kanye products that it would have to write off as a loss.
In the latter half of 2022, the sizable clothing corporation cut ties with the disgraced anti-Semitic musician.
According to Fortune magazine, they estimated a loss of $246 million at the time but stressed that it was the proper choice to “not tolerate” antisemitism and bigotry.
They found that their financial sacrifice was far greater than they had anticipated.
The company still has a sizable amount of Yeezy inventory despite abruptly ceasing production of the products.
The company has decreased its forecasted revenues by $1.3 billion and operating profit by $536 million for 2023, which would bring operating profit to almost nothing, according to a recent financial statement.
The announcement caused an 11% decline in Adida’s share price on Friday morning.
According to Fortune, CEO Bjrn Gulden stated that “the numbers speak for themselves.” “2023 will be a year of change to lay the groundwork for the company to be thriving and profitable again.
The consumer, our athletes, our retail partners, and our adidas employees will receive our undivided attention.
Adidas has all the necessary components for success: a fantastic brand, fantastic people, fantastic partners, and an unmatched global infrastructure.
“We need to put the parts back together again, but I’m confident that with time, we’ll make Adidas shine again,” he continued.
Yet more time is required.