Adidas has been hit by recent events, mainly due to the controversy with famous American rapper and fashion designer Kanye West, also known as Ye. The rapper has been making anti-Semitic comments and spreading conspiracies on social media in recent weeks.
This act has alerted companies that have had collaborations with West and have begun to take action. Adidas was one of them and eventually decided to end its cooperation with him immediately. For Adidas, this collaboration was quite significant, because the company was selling Yeezy products, which are sold under Kanye's name. Yeezys are some of the most premium products that the brand sells, and thanks to the giant margins, it is getting significantly rich on them.
However, the public was taken aback by the controversy, as they expected Adidas to lose all the profits in the future due to this issue. This key product, which made a whopping nearly $2 billion last year and accounted for 8% of total sales, was at risk and the markets reacted unfavourably. Another blow for Adidas was the termination phase of the collaboration, which cost the company $500 million in revenue. However, in the end, it looks like the company will come out of this positively in the long run, as it has stated that it will continue to sell Yeezy products, just under its own branding. Adidas did the maths and found that the move will save them $300 million since they won't incur costs for royalties and marketing activities.
This announcement reassured, if not delighted, investors, as Adidas shares gained 3.3% in a single day last week, which is definitely above average for such a short trading session. [*]
[*] Past performance is no guarantee of future results
