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Highlights
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Adidas faces ongoing challenges from the termination of its collaboration with Kanye West.
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Analysts foresee significant impacts on North American sales and overall profitability.
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Global sales growth is projected, primarily driven by European demand.
Adidas AG {OTC:ADDYY} is currently dealing with the repercussions of its partnership with Kanye West, known as Yeezy, which has turned into a substantial liability for the German sportswear giant. According to analysts at Barclays PLC, the upcoming third-quarter results are likely to reflect continued financial strain from this collaboration.
Initially launched in 2015, the Yeezy footwear line achieved remarkable success, significantly contributing to Adidas’s sales during Kanye’s peak popularity. The collaboration was hailed as one of the great retail narratives of the century, at one point representing as much as 8% of the company's total sales. However, the partnership came to an abrupt end in 2022 following West's antisemitic remarks, transforming a celebrated venture into a considerable setback for the brand.
In 2022, Adidas disclosed a substantial profit hit due to the termination, indicating that further financial repercussions are anticipated. Analysts at Barclays highlight that ongoing inventory write-downs and associated costs could negate any potential profit from Yeezy sales during this period. This situation is expected to notably impact North American sales, which are projected to decline.
On a broader scale, Barclays forecasts an 11% increase in global sales, largely fueled by demand in European markets. Excluding the Yeezy line, the expected growth in global sales may reach 14%. This positive trend in Europe contrasts sharply with the anticipated challenges in North America.
Barclays has maintained its earnings per share estimates for the third quarter and the full year of 2024. As Adidas prepares to announce its financial results on October 29, stakeholders will closely monitor how the brand navigates this difficult period and its ongoing efforts to stabilize its operations post-Yeezy.
