Adidas splits from Yeezy, what next?

When Adidas and Kanye West began their partnership in 2013, there was little to suggest the Yeezy brand would scale to the hugely successful and profitable range it is today.

Representing 7 percent of Adidas revenue with an estimated annual turnover of 1.8 billion dollars according to the New York Post, cutting ties with Ye, as Mr West prefers to be called, is a substantial loss. The little time left in 2022 would see the company take a hit of 250 million dollars. Furthermore, shares in Adidas are at their lowest since 2016.

A unique partnership

Adidas’ partnership with Ye was unique in terms of its collaboration between a non-sporting celebrity and a global sportswear brand. The scale of revenue and the hype of its releases matched it to Nike’s deal with Michael Jordan, but no other brand alliances compare.

Adidas now has a sizeable profit stream to replace at a time when its sales are lagging and inflation affects all aspects of its business. The German sportswear giant’s financial challenges already led to it reducing its outlook, and internally it is looking for a new CEO as Kasper Rørsted will exit his role in 2023.

Adidas has not disclosed the terms of breaking its Yeezy deal, however Ye is thought to be the majority owner, with Adidas handling production and distribution and owning design rights to released products. As purchasing and manufacturing of the SS23 collection would be well under way, Adidas may have retained the right to release future products. In a statement Adidas said it is “the sole owner of all design rights to existing products as well as previous and new colorways under the partnership.”

In terms of retail, Yeezy has always enjoyed high demand that exceeded its inventory, prompting an equally high premium to the re-sale value of sneakers. It had an ‘it’ status that never waned, until now. Data from Aldan Insights says new colourways set to be released in November and December will show much appetite consumers will have for Yeezy since the dissolution of its Adidas tie-up. In either case, the lucrative business arrangement will be a loss to both parties.