Kanye Adidas

Is Cutting Ties with Kanye West a Financial Net Negative for Adidas?

I believe that ending the relationship with Ye is a financial net positive for Adidas. Here’s why. 

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On Tuesday, Adidas parted ways with Kanye West over his recent episodes of hate speech and anti-semitism. 

Shortly after the announcement, one of my friends shared this article from the Action Network (a revered financial analysis site *sarcasm*), which stated how this could be a $10 billion decision. 

My friend then posed the question – “Is parting with Kanye net-negative financially for Adidas?”

His sole argument hinged on the direct revenue loss that Adidas would incur by cutting ties with Ye. To quote him – “They would lose a ton of dough.”

I debated that there were other factors in play, and that the divorce, in my opinion, was a net positive financially for the company. 

Here’s why.

Impact on Revenue

There is no arguing that Adidas will take a short-term financial hit by ending the partnership with Ye. 

The company said they’ll suffer a loss of up to 250 million euros in net income for 2022. 

Of course, they will lose top-line revenue. There are varying estimates of how much revenue the Yeezy brand brings in for Adidas. Most of what I’ve seen approximate sales of $1.5-2B per year. 

Certainly this money coming directly off the books hurts. 

But how much does it hurt?

Adidas made $25.1B in revenue in 2021. Thus the revenue loss accounts for 6-8% of overall company revenue. 

Is that a hit? Definitely. 

Is it a company-shattering hit that can’t be recouped? I don’t think so.

A difficult factor to measure is how much revenue Adidas would have lost if they kept working with Ye. 

Many current and future customers would no doubt refuse to buy Adidas products if they continued to partner with Ye. Would Adidas have lost more than the $1.5-2B in Yeezy revenue though? This is difficult to model (I’ll leave that to the investment bankers and industry analysts) but I don’t think it’s outside the realm of possibility.

To summarize, short-term revenue definitely takes a hit. But long-term revenue may be better off without Ye on their roster.

Impact on Stock and Market Cap

The next thing I looked at was how the situation impacted Adidas’ stock price and market cap. 

The price of Adidas stock was ~$58 a week ago, around the time companies like Balenciaga, Vogue, and others announced that they were cutting ties with Ye. With 365M shares outstanding, this corresponds to a market cap of about $21B.

As Adidas did and said nothing, their stock dropped to a low of $47 yesterday morning, losing about $4B (almost 20%) in market cap over the week. 

Then Adidas announced yesterday that they are ending the relationship with Ye, and the stock recovered to around $50 this morning, adding $1B back to the company’s value.

This is by no means a thorough, exact technical analysis, but I think it provides directional information about 1) how Adidas’ indecision over the past week may have led to a loss of confidence in the company, and 2) how cutting ties with Ye was a net positive in the minds of investors. 

Impact on Brand

Brand strength is a difficult thing to measure, but it is the most important asset of a retail company. 

And maintaining the partnership with Ye would have caused long-lasting, possibly irreversible damage to the Adidas brand. 

In my opinion, huge swaths of their customer base (and not just Jewish people) would have revolted against the brand. And employees and other stakeholders would have joined them. 

There would have been protests, walkouts, and more. And this negative PR would have deleterious effects on the company’s short- and long-term brand strength, and ultimately revenue.

Furthermore, this loss of revenue would have led to lower investor confidence, a lower stock price and market cap, and then even more losses in market confidence, and so on and so forth. 

A vicious cycle indeed.

While the partnership with Ye helped improve the Adidas brand over the last few years, his hateful behavior strained the relationship and made it untenable for the company to continue working with him. 

Now Adidas can focus on finding a non-asshole partner to grow their revenue and brand again. 


The financial impact of this situation can’t be whittled down to just the short-term direct revenue lost for ending the relationship with Ye. 

There are other factors, such as stock performance, brand strength, and long-term revenue, that have to be taken into account. 

Looking at just short-term revenue impact, of course Adidas is going to take a hit. 

But taking into account additional factors over the long term, I believe that the decision to cut ties with Ye is a net positive financially for the company.

What do you think? Are there other factors that you considered that I didn’t? I’d love to hear from you, please respond to the tweet thread below!

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