Adidas to lose £1.2 billion after ending a partnership with Kanye West

German sportswear giant Adidas could potentially be facing their first annual loss in 30 years, with the break-up of their partnership with the rapper Kanye West leaving the company facing a financial headache.

Adidas had held a long-standing partnership with West, now known as Ye, since 2013. 

The manufacturer ended the collaboration in October, announcing it would cease production of all 'Yeezy branded products and [stopping] all payments to [West] and his companies'.

The partnership was ended due to the rapper's increasingly erratic behavior and anti-Semitic outbursts.

Adidas announced on Wednesday that the company may be faced with an overall revenue loss of £1.2 billion due to unsold stock, as they weigh up their options.

Adidas acted in October after West caused controversy with a series of anti-Semitic comments. The rapper said in a social media post that he would go 'death con 3 on Jewish people', then doubled down in media interviews with comments that included vile remarks about Jewish people.

The comments prompted Adidas to review their partnership, with the company then confirming it would terminate their relationship with the rapper.

'Adidas does not tolerate antisemitism and any other sort of hate speech,' a company statement read at the time. '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.'

The sportswear giant warned at the time the termination of the partnership would have a significant impact on their financial results, with the 'Yeezy' products a highly lucrative part of their business model.

Adidas revealed on Wednesday that the split had cost the company £534million in sales during the fourth quarter of 2022, with the Yeezy shoes expected to have brought in £1 billion in revenue this year.

No decision has yet been reached by Adidas. The German manufacturer has said it is continuing to review its options for the remaining Yeezy inventory.

According to the Washington Post, they could 'literally burn £500m' of the Yeezy range, with the product having been tainted by its association to West.

However luxury brands like Louis Vuitton and Burberry have previously faced criticism for burning unsold sold to preserve brand value.

Adidas could decide to sell the stock, but analysts believe they would face the prospect of being criticised for attempting to profit on the tainted products, even if they do not carry the Yeezy label.

Another option mentioned is that Adidas could donate proceeds raised by selling repurposed stock to charity.

Adidas has admitted the company's operating profit could be lowered by an additional £446million should it make the decision to write off the remaining stock.

The company has acknowledged that giving the shoes away to charity is complicated due to the resale value having surged since splitting with West.

John Mocadlo, CEO of online reseller Impossible Kicks, told CNN last month that demand for Yeezers has increased by 30 per cent since the split in October.

The trainers have reportedly been selling at between 20 to 40 per above their retail value, Mocadlo claimed.

The spike in demand reportedly comes with the trainers having been viewed as collectors items which could have further value in the future. Or simply because buyers like the style.

Sites like Ebay have also seen a surge in Yeezy products go on sale.

West was reported to have had a net worth of around £1.6 billion prior to the deal being terminated.

Forbes estimated his net worth had crashed to £337 million after Adidas ended the collaboration, with their deal reported to have accounted for around three quarters of the rapper's worth.

Adidas were not the only major brand to cut ties with West, with Gap, Footlocker, TJ Maxx, and Balenciaga also severing deals.   

Much of West's remaining wealth is now derived from his music catalogue and real estate.