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Adidas shares plunged by 12.6% late last week after issuing a warning that this could result in a big loss this year which would be the first time for the company in three decades. The company said that this event was triggered by its break-up with Kanye West.
According to Reuters, Adidas said that its inventory of West’s Yeezy brand could be completely crossed out and could lead to a $749 million loss this year. This is because the sneakers and sportswear under the brand have price tags of up to $700.
The German sportswear and sneaker maker further said that by not selling the stocks of Yeezy items alone, it would take a hit of €1.2 billion or a $1.3 billion revenue loss this year. Its operating profit will also plummet by around €500 million to break even.
"The numbers speak for themselves,” Adidas’ new chief executive officer, Bjorn Gulden, said in a statement. “We are currently not performing the way we should."
Adidas severed its ties with Kanye West following his antisemitic comments on social media. He was also involved in various controversies and with all the negative issues, the company made the decision to split up with the rapper.
Shortly after the split with West, the company said it will sell Yeezy’s clothing pieces and shoes under a new name. It will be rebranded but selling them under its own branding will save Adidas some $300 million in royalty payments and marketing fees. However, some business analysts said that this repurposing scheme will create problems.
“There really are no good options for this distressed brand that sat somewhere between prestige and luxury,” CNN Business quoted Strategic Resource Group’s retail expert and managing director, Burt Flickinger, as saying in a statement.
Finally, it was reported that at this time, Adidas is still trying to figure out what to do with all of its Yeezy inventory. If it fails to find a way to sell the products, it could suffer significant losses. Then again, the sneaker maker is already expecting a decline in its sales this year, at a high single-digit rate.
Photo by: Alex Haney/Unsplash
