(Photo by Spencer Platt/Getty Images)
Adidas’ quarterly earnings report took a beating primarily due to its breakup with Ye (formerly known as Kanye West) after his slew of Anti-Semitic remarks.
, the German sportswear brand lost a reported $441 million in sales in the first quarter of 2023, resulting in profits declining to $66.1 million from $482 million in the same period last year. Net sales, which decreased 1% to $5.8 billion, “would have risen 9% with the Yeezy line,” said the company.
This was a little better than the fourth quarter, where the loss of the Yeezy partnership cost Adidas $661 million in lost sales and resulted in a company net loss of $565.8 million.
This, of course, is bad news as no corporation wants to lose money, especially not hundreds of millions. Yet the stock wasn’t hampered when the earnings were reported; it actually jumped over $7 on Friday.
Yet we know that investors are itching for Adidas to recoup its losses, and some probably think the company should overlook Ye’s ignorance and hatred and re-launch the partnership. After all, we live in a capitalistic society where earnings are often valued higher than humanity.
But instead of urging, or even contemplating that Adidas rekindle the relationship with Ye, the three-stripe brand should be applauded for its decision to terminate the Yeezy partnership and not defer to profits over moral decency.
It’s a stance the company made clear when .
“Adidas does not tolerate antisemitism and any other sort of hate speech. Ye’s recent comments and actions have been unacceptable, hateful and dangerous, and they violate the company’s values of diversity and inclusion, mutual respect and fairness.
“After a thorough review, the company has taken the decision to terminate the partnership with Ye immediately, end production of Yeezy branded products and stop all payments to Ye and his companies. adidas will stop the adidas Yeezy business with immediate effect.“
While the termination was immediate, and rightfully so, things haven’t been all good for Adidas in the aftermath.
Aside from sales and profits declining, the brand has approximately $500 million in Yeezy inventory just sitting in warehouses.
The two sides had reportedly reached an agreement in February to sell the remaining inventory off but as of today, that inventory is simply collecting dust.
Adidas now faces
They can sell it, but then they would have to pay Ye royalties. They could try to remove the Yeezy branding, but that would be suspect and dishonest. Or they could give it donate/give the sneakers away to those in need, but with the power of the secondary market, that would result in a massive resale frenzy and Adidas, ultimately, wouldn’t profit from those sales.
That’s not the only issue Adidas faces due to Kanye West.
A group of investors is suing the brand, claiming that Adidas knew about Kanye’s behavior and antics years prior, even pointing to his 2018 “slavery was a choice” statement and his antisemitic behavior displayed around employees. By not addressing those issues sooner, said the claimants, Adidas failed to stem future financial losses like the ones they realized in the fourth quarter.
That holds some merit, but the bigger picture is that Adidas ultimately did the right thing and severed its Kanye ties. Now the company needs to focus on looking for a new brand or partnership to foster in order to grow its bottom line.
Hopefully, Adidas’ profits return later this year and in the years to follow, for their stance against hate should be cheered by society and rewarded by investors.
This should be heralded as an example of a corporation standing up for what’s right. It’s somewhat similar to what Disney did in speaking out against Ron DeSantis’ “Don’t Say Gay” bill.
And while the former has paid for its decision financially and the latter is paying punitively, more companies should use their position and economic power to invest in protecting humanity, morality and civil rights.
After all, everyone can profit from those qualities.
