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The Adidas-Kanye divorce will be expensive

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Will they separate? Is not it? On Tuesday, we finally got an answer on whether Kanye West and Adidas AG would part ways. The sportswear giant said it was ending its nearly decade-long collaboration with the musician, now officially known as Ye, after putting him under consideration last month.

The company said it would immediately end the partnership with Ye, end production of Yeezy-branded products, and stop all payments to Ye and its companies. It will cease the Adidas Yeezy business with immediate effect.

Adidas was too slow to move away from Kanye’s controversies. He had come under increasing pressure in recent days to remove the star after his comments targeting Jews, including a tweet that led to Twitter suspending his account. This followed Ye sending T-shirts down the Paris catwalk with the slogan “White Lives Matter” on them. On Friday, Kering SA’s Balenciaga said it had stopped working with West.

By acting so late, Adidas made Ye its problem, risking consumer backlash. Perhaps that’s why he had to be particularly vocal in his denunciation of Ye and leave no room for his Yeezy lines to live.

“Adidas does not tolerate anti-Semitism and any other type of hate speech. Ye’s recent comments and actions have been unacceptable, hateful and dangerous, and they violate the values ​​of diversity and inclusion, mutual respect and corporate equity,” Adidas said in a statement, noting that it is the sole owner of all design rights to existing products, as well as previous and new colorways under the partnership.

The company said the termination would have a short-term negative impact of up to 250 million euros ($246.5 million) on its net profit for the full year, given the high percentage of sales at last trimestre. But the long-term damage will be much greater. It is estimated that the partnership with Yeezy generates annual sales of between 1 and 1.5 billion euros, or approximately 4 to 8% of the Adidas group’s revenue.

Adidas shares fell nearly 5% on the news.

The separation comes at a difficult time for the company. It last week slashed its forecast for full-year sales and profit growth amid China’s Covid-19 restrictions and weaker demand in US and European markets since the start. september.

Managing Director Kasper Rorsted will step down next year. His successor will have to find a way to rekindle enthusiasm for the brand, which is losing the Gen Z sneaker battle with Nike Inc. Unlike Adidas, the American company said last month that it saw no signs of slowing down in the States. -United. Now the new CEO of Adidas will also have to find a way to fill the void left by Yeezy.

The sportswear maker has options – it could dig through the Adidas archives to try and find another winning sneaker line or expand its collaborations with luxury brands, such as Prada SpA and Gucci of Kering SA.

In truth, Adidas’ partnership with Ye ran its course a while ago, but the company was hesitant to give up its star selling power. His controversies, which have kept him at the forefront of consumer concerns for so long, may have finally become unbearable, but that won’t make divorce any less painful financially.

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering consumer goods and the retail industry. Previously, she was a reporter for the Financial Times.

More stories like this are available at bloomberg.com/opinion

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