Adidas knew it was going to take a big hit when it cut ties last fall with "one of the most successful collaborations in our industry's history": its relationship with Kanye West and his Yeezy brand of footwear and clothing, after the rapper made antisemitic remarks and exhibited other offensive behavior. Now, the sportswear manufacturer is revealing just how big a hit that may be. In its 2023 outlook and financial guidance released Thursday, Adidas noted that if it isn't able to somehow "repurpose" and sell the Yeezy inventory it now has lying around since it got yanked from shelves, it will see a "significant adverse impact" to its bottom line—namely, an estimated $1.3 billion in lost revenue this year, as well as a $535 million-plus loss in operating profit.
That would translate in a total operating loss for 2023 of about $750 million—the company's first in at least 30 years, reports Quartz. "The numbers speak for themselves," new Adidas CEO Bjorn Gulden said in the guidance. "We are currently not performing the way we should." He noted that 2023 would be a "year of transition," with a "full focus on the consumer, our athletes, our retail partners, and our Adidas employees." Quartz notes that because Adidas is the intellectual-property owner for the Yeezy shoe designs and colors, all it would have to do, in theory, to resell the footwear is dump the "Yeezy" branding and then resell the shoes.
But analysts warn that the entire line is permanently toxic, as the shoes "will always be synonymous with West ... [which] would likely result in muted customer demand," one GlobalData analyst told Retail Dive in November. One option to help Adidas recoup some money is to work more aggressively with other celebrities (Beyonce is one possibility Quartz mentions), though it's not clear any other options could approach West's popularity. CNBC reports that Adidas shares plummeted in early trading Friday, falling by 11% in the wake of the guidance update. Still, Gulden remains optimistic the company can bounce back. "We need to put the pieces back together again, but I am convinced that over time we will make Adidas shine again," he noted in the outlook report. "But we need some time." (Read more Adidas stories.)