Adidas has warned of potential big profit losses after cutting ties with Kanye West last year.
The sportswear company ended its association with West in October 2022 after the rapper posted a series of anti-Semitic comments on social media.
In a statement released at the time, an Adidas spokesperson called Ye’s comments and behavior “unacceptable, hateful and dangerous”, adding that he violated the “values of diversity and inclusion, of mutual respect and fairness” of the company.
Previous reports claimed Adidas placed the association under review for matters not necessarily related to West’s hate speech.
Following a “thorough review”, it has been confirmed that the brand will immediately halt production of its Yeezy product line and suspend payments to the artist and his businesses.
Adidas said it is set to suffer a drop of up to €250m (£217m) in net profit in 2022 as a result of the move.
Now, as BBC News reports, Adidas has released its 2023 financial forecast in which the sports giant refers to “the significant negative impact of not selling existing (Yeezy) stock”.
“It would reduce revenue by around €1.2bn and operating profit by around €500m (£443m) this year,” the document said.
“Against this backdrop, Adidas expects currency-neutral sales to decline at a high single-digit rate in 2023. The company’s underlying operating profit is expected to be around break-even.”
In addition, the brand expects the reorganization of the business will result in an additional cost of 200 million euros (177 million pounds). This could lead to Adidas’ operating losses of 700 million euros in 2023. However, the company expects to return to profit in 2024.
The company also revealed that its profit last year fell to 669 million euros (591 million pounds).
Adidas explained that it is “still reviewing future options for the use of its Yeezy inventory.”
Bjørn Gulden, CEO of Adidas, said: “The numbers speak for themselves. Currently, we are not functioning as we should.
“2023 will be a year of transition to lay the foundations to become a growing and profitable business again. We will be fully focused on the consumer, our athletes, our retail partners and our adidas employees.”
Last November, it was reported that the CEO of Adidas and other senior company officials discussed the possible consequences of their four-year relationship with West.
It came after a Rolling Stone report made claims about the treatment of Yeezy employees, with some former employees alleging a “cult atmosphere” at the brand’s offices. The outlet could not reach West for the item.
Later, an open letter from Yeezy and Adidas employees accused the rapper of using pornography and “mind games” to intimidate and manipulate staff.