FRANKFURT, GERMANY (AP) – Adidas on Wednesday lowered its earnings forecast for the year to account for losses from ending its partnership with the rapper formerly known as Kanye West.
The German shoe and sportswear maker cut its sales and profit outlook for the year as part of its third-quarter earnings statement, even as the company’s chief financial officer said the profitability of the Yeezy shoe collaboration with Ye had been “overstated”. The company would largely offset the impact of the breakup next year by no longer having to pay royalties and marketing fees for the brand, CFO Harm Ohlmeyer said.
The company halved its expectations for net profit from continuing operations to EUR250 million (USD252 million) this year from EUR500 million. That matched its earlier statement that ending the partnership with Ye would cost it EUR250 million in profits.
Adidas also lowered its revenue forecast for the year to a low single-digit increase from a mid-single-digit increase.
The October 25 split with Ye, with production of Yeezy products halted and royalty payments ended, will leave Adidas searching for another star to help it compete with ever-larger rival Nike. Adidas also is facing internal upheaval, with its CEO Kasper Rorsted stepping down today. He was previously expected to hand over next year, but the company announced the quicker change on Tuesday as it named Puma CEO Bjørn Gulden as his replacement.
Adidas faced pressure to split with Ye as other brands did earlier over the rapper’s comments in interviews and social media. He was suspended from both Twitter and Instagram.
Adidas owns the rights to product designs except for the Yeezy name and is developing plans for what to do with existing inventory.
The company had already cut its full-year earnings forecasts five days before announcing its split with Ye. The earlier outlook revision cited slowing activity in China, where severe restrictions aimed at limiting the spread of COVID-19 have held back the economy, and clearance of elevated inventory levels.
Net income for the third quarter from continuing operations was EUR66 million, down from EUR479 million in the same quarter a year ago.
The decrease largely reflected EUR300 million in one-time costs, the majority of it from winding down the company’s business in Russia.