Adidas announced the termination of the contract with Kanye, and the "Yeezy shoes" will be discontinued! What happened to both sides?

According to foreign media, Adidas officially announced the termination of cooperation with Kanye West. The company statement stated that Kanye’s recent remarks and actions are unacceptable, hateful and dangerous. In addition, Adidas will “stop making Yeezy-branded.

Adidas’ current sales volume is Kanye’s Yeezy series. According to Adidas’ data from the last fiscal year, in 2021, the sales of Adidas Yeezy series sneakers will reach nearly 1.7 billion US dollars, a year-on-year increase of 31%, and Yeezy also received 191 million US dollars in copyright fees.

And Adidas 2022 third quarter performance report shows that brand sales increased by 11% year-on-year to 6.408 billion euros (about 45.7 billion yuan), net profit fell 62.6% year-on-year to 179 million euros, and gross profit margin fell to 49.1%. Operating margin slipped to 8.8%.

Among them, the sales performance in Greater China remained weak, recording a double-digit decline. It is worth noting that this is the sixth consecutive fiscal quarter for Adidas to decline in revenue in Greater China.

Adidas without the Yeezy series, or worse. Adidas announced that it will stop producing Yeezy shoes, which may bring a loss of 250 million euros (about 1.8 billion yuan).

On October 25, local time, Adidas issued a statement saying that Adidas cannot tolerate anti-Semitism and any other type of hate speech. Due to Kanye West’s recent anti-Semitic remarks and behavior, it has decided to immediately terminate its partnership and stop production. Yeezy brand products, Adidas will immediately cease the Adidas Yeezy business.

Given the high seasonality in the fourth quarter, this is expected to have a short-term negative impact of up to 250 million euros on the company’s net profit in 2022, the statement said.

At the same time, existing investment institutions have downgraded Adidas’ rating based on the breakdown of cooperation. It can be said that Adidas’ move is to cut down a “cash tree”.

Yeezy brand products are called “Yeezy shoes” in China, designed by American rapper and fashion designer Kanye West. The Yeezy series is undoubtedly Kanye’s most proud work. Yeezy shoes are very popular all over the world. According to Bloomberg, the current valuation of the Yeezy brand by the investment community is about $4 billion.

At first, Kanye reached a cooperation with the sports brand Nike to launch the Air Yeezy series of joint sneakers. In 2013, he switched to Adidas. In 2016, Adidas and Kanye signed a deal to produce and distribute his Yeezy line, which didn’t expire until 2026, according to the original agreement.

Adidas has also previously said the partnership has had a “huge impact” on its business and is one of the most successful in the history of the industry.

The Yeezy brand brings in nearly $2 billion in annual revenue for Adidas, accounting for about 10 percent of its revenue, said David Swartz, an analyst at investment firm Morningstar. “It has been an important product line for Adidas and has helped reinvigorate its North American business… Adidas has had a hard time competing with Nike for a top sponsorship, and Yeezy is A big advantage for Adidas.”

Notably, Adidas wrote at the end of the aforementioned announcement, “Adidas is the sole owner of all design rights for existing products and previous and new colorways under the partnership.”

In this regard, CNN concluded after interviewing multiple legal experts that although Adidas’ statement clearly stopped selling Yeezy-branded products, Adidas may rename existing Yeezy designs. In short, “Yeezy” may be owned by Kanye, but the Yeezy shoe design is the intellectual property of Adidas.

Adidas’ second-quarter 2022 financial report shows that the company’s second-quarter net sales were 5.596 billion euros, a year-on-year increase of 10.2% from 5.077 billion euros in the same period last year; net profit was 309 million euros, a year-on-year decline of 24.2%. Among them, the Greater China region continued the downward trend of performance in the first quarter, and fell again by 35% in the second quarter.

Balenciaga also terminates contract with Kanye

In fact, it’s not just Adidas. On October 23, Kering, the parent company of the French luxury brand Balenciaga, announced that the brand would terminate its cooperation with Kanye because the latter made controversial remarks related to racial discrimination.

Kering Group said: “Balenciaga and Kanye West no longer have any relationship, and there will be no future cooperation plans.”

Last month, Gap veiled announcing the termination of its partnership with Kanye.

What remarks did Kanye make that made major brands cut off their cash cows?

It turned out that during Paris Fashion Week, Kanye wore a new sweater with “the life of a white man” on the back. This sweater is a new addition to its Yeezy SEASON 9.products and cease all payments to Ye and its companies.”

This sentence is too harsh for ordinary blacks because it is a slogan conceived by white supremacist groups such as the Ku Klux Klan to fight the Black Lives Matter movement.

After the video was posted online, it caused uproar in the American entertainment and political circles.

The Yeezy series is undoubtedly Kanye’s most proud work. Its earliest joint name is the Air Yeezy series of sneakers launched by the sports brand giant Nike.

In 2013, Kanye West’s Yeezy series of sneakers switched to Adidas. According to the original agreement, the contract between Adidas and Kanye will not expire until 2026.

According to Bloomberg, the current valuation of the Yeezy brand in the investment

community is around $4 billion.

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