German sportswear giant Adidas has reported a net loss of €39 million ($43 million) in the first quarter of its 2023 fiscal year, following the end of its partnership with African-American rapper-turned-mogul Kanye West and his brand Yeezy.
This is a significant drop compared to the €482 million ($531.2 million) profit the company posted in the same period last year. Adidas decided to cut ties with Yeezy in October 2022 after the rapper made anti-Semitic comments that conflicted with the company’s values of diversity, inclusion, and equality.
Adidas’s operating profit also fell by more than 85 percent to €60 million ($66.2 million) due to lost earnings resulting from discontinuing the production and sale of its popular Yeezy line.
The impact of the fallout with the West-led brand hit sales in the reported quarter by around €400 million ($441.56 million), mainly affecting revenue across North America, Greater China, and EMEA regions.
However, despite the significant drag from Yeezy, Adidas managed to increase footwear revenue by one percent during the quarter, indicating strong momentum of the brand in performance categories such as football, running, outdoor, and tennis.
On the other hand, apparel sales during the first three months of 2023 decreased by three percent due to high inventory levels in the market and the company’s disciplined sell-in approach. Accessories grew eight percent, led by strong growth in football.
Adidas CEO Bjorn Gulden said that he was pleased to see the company’s performance categories continue to develop well and grow stronger, but the decline in Lifestyle and the loss of the partnership with West and his Yeezy brand was hurting earnings.
He added that inventories were still too high, but already €300 million ($330.6 million) lower than at the beginning of the year, and the company would continue to work hard to normalize inventory levels during the year in line with plans to lower discount levels, increase full-price business and re-build brand heat again.