Adidas ditches Ye, but not all its problems
One of the biggest global business stories this week was the decision by Adidas to drop its affiliation with the rapper and designer Kanye West after his recent spew of anti-Semitic remarks, ending a professional relationship and collaboration that lasted more than eight years.
First things first: hate speech of any type is abhorrent, and West’s rhetoric against Jews deserves neither indulgence nor more oxygen in public discourse. The dignity of any group of humans is more important than the interests of a company.
Which is precisely the predicament in which Adidas found itself in in recent days, dragging its feet on a “review” of its relationship with West, who now goes simply by Ye, it instituted on 6 October.
Ye’s recent screed began on that day with an initial interview with Fox’s Tucker Carlson, and continued with a series of posts on social media. Other brands and agencies, including Balenciaga, Gap, and CAA, moved to end ties with him more swiftly.
For Adidas, the second-largest athletic brand globally by sales, cutting Ye meant cutting a significant driver of business: analysts estimate his Yeezy sportswear line accounts for about 8 per cent of annual revenues.
Ye’s impact at the German company can hardly be overstated. In 2015, after years of declining sales in the US market — the lion’s share of the sporting goods industry at the time — Adidas said it wouldn’t renew its outfitting contract with the National Basketball Association, the ultimate symbol of how far its brand had faltered. That same year, the first Yeezy shoe was released under the three stripes, giving Adidas an instant credibility boost with tastemakers and making the brand relevant again in America.
In its second quarter 2016 earnings report, Adidas called their collaboration “the most significant partnership ever created between a non-athlete and an athletic brand”.
Fast forward to today. More than two years into the global reset brought by the pandemic, Adidas has issued two profit warnings in less than three months — most recently eight days ago — due to piles of excess inventory amid slower demand. The company previously announced it is searching for a successor to chief executive Kasper Rørsted, who is expected to depart next year, three years earlier than his existing contract.
Can Adidas’ initial shortsightedness on Ye — it was berated by the Central Council of Jews in Germany and the Anti-Defamation League — be attributed to financial difficulties or a power vacuum? It’s hard to say definitively. But Adidas has had other stumbles on social issues in recent years: during the reckoning on race in the US after the murder of George Floyd in 2020, the company initially opted to retweet a statement by rival Nike before deciding to speak out on racism in its own voice.
The departure of Rørsted, meanwhile, is the second such transition of a non “shoe dog”, or industry veteran, after a short tenure leading sports brands. Rørsted, who worked at Henkel, Hewlett-Packard, and Oracle before joining Adidas, follows former Aldo and North Face executive Patrik Frisk who left his post as chief executive of Under Armour in June.
The Ye controversy is unquestionably problematic for Adidas. With shares down 66 per cent so far this year, it’s also not the least of the company’s troubles.