Adidas is reporting a $540 million loss over canceling Ye and having to sit on their unsold Yeezy inventory.
The German sneaker and sports apparel company ended its partnership with Ye after he made a series of controversial remarks.
According to a report from NPR, “the fourth-quarter loss, also attributed to higher supply costs and slumping revenue in China, contrasts with a profit of 213 million euros in the same period a year ago.”
Things are not looking up for the company, either. They are projecting a loss of nearly $740,000,000 for 2023 if they do not find a way to repurpose the unsold Yeezys. If that happens, it will be the first annual operating loss for the company in 31 years.
The report states that CEO Bjorn Gulden said in a statement that 2023 would be “a transition year” and “we can then start to build a profitable business again in 2024.”
Gulden said, “I am convinced that over time we will make Adidas shine again. But we need some time.”
After publishing their 2022 report on Wednesday morning, stock in Adidas fell 2.2%.
The Adidas breakup also hurt Ye, as it previously accounted for $1.5 billion of his net worth.
Adidas had announced at the beginning of October 2022 that the relationship with the artist was “under review” after he wore a t-shirt that said “White Lives Matter” during his show at Paris Fashion Week and called Black Lives Matter a “scam.”
During an appearance on the YouTube show Drink Champs later that month, which was subsequently deleted, Ye asserted that “I can say antisemitic things, and Adidas can’t drop me. Now what?”
Following that appearance, Adidas announced they terminated their business relationship with the artist and mogul due to “hate speech.”
“Adidas does not tolerate antisemitism and any other sort of hate speech. 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 in a statement obtained by Vanity Fair. “After a thorough review, the company has taken the decision to terminate the partnership with Ye immediately, end production of Yeezy-branded products, and stop all payments to Ye and his companies. Adidas will stop the Adidas Yeezy business with immediate effect.”
Hours after the news broke of the partnership’s termination, Forbes announced that Ye is no longer on their billionaires’ list.
“The $1.5 billion value of the Adidas deal was calculated off of a multiple of annual earnings. Based on interviews with industry experts, Forbes had viewed the royalties Ye received from Adidas to be similar to royalties from music catalogs or film residuals,” Forbes reports. “The Adidas income stream could be sold off, those experts said, just like dozens of musicians (including the likes of Bob Dylan and Bruce Springsteen) have sold off their life’s work over the past two years.”
The report added, “without Adidas, Ye is worth $400 million. The remainder of Ye’s fortune, Forbes estimates, comes from real estate, cash, his music catalog and a 5% stake in ex-wife Kim Kardashian’s shapewear firm, Skims. (A source close to Skims told Forbes Ye hasn’t been involved with the brand since its 2019 launch.)”