Kanye West spent 9 years with Adidas — see how the Yeezy brand went from nearly $2 billion in sales to $0 in a snap
Jonathan Leibson/Getty Images; Rachel Mendelson/Insider
- Adidas announced an endorsement deal with Kanye West in November 2013.
- By 2019, Adidas sales of his Yeezy brand eclipsed $1 billion annually.
- In October, in the wake of antisemitic comments, Adidas ended the partnership.
In November 2013, Adidas sales in North America, the most critical territory for sportswear sales, were down 1% for the year. Across the company, sales were flat.
The company had just five shoes on the influential Complex list of best 50 sneakers of 2013. Industry leader Nike had 30 shoes on the list and had just reported an 8% annual sales increase.
But that same month, Adidas announced a partnership with Kanye West, the polarizing musician and fashion designer, now known as Ye.
Three years later, Adidas reported an 18% annual sales increase, more than doubling Nike's fiscal-year percentage gain. Yahoo Finance named Adidas Sports Business of the Year, citing a string of hot products, including the NMD, Ultra Boost, and West's Yeezy, and the company's ability to capitalize on a consumer shift away from performance products to more casual athleticwear.
While analysts debated West's role in the company's resurgence, Mark King, who was the president of the North America division at the time, gave credit to the artist.
"I think Kanye definitely helped make the brand cool again," he told Yahoo Finance in 2016. "But I think, had it only been Kanye, it would have gone up and gone down very quickly."
By 2019 West had started referring to himself as "Ye" — legally changing his name to it in 2021 — and Adidas sales of Yeezy products had surpassed $1 billion for the first time. But Ye's relationship with Adidas had also started to deteriorate.
In a 2018 interview with TMZ, Ye said slavery "sounds like a choice," prompting Adidas' CEO, Kasper Rorsted, to defend him on CNBC. More criticism followed after Ye wore a "Make America Great Again" hat on "Saturday Night Live" and met with then President Donald Trump in the Oval Office.
Despite the turbulence, Adidas Yeezy sales continued to grow. In February 2021, the financial-services company UBS projected sales would hit $2 billion for the year and would continue climbing, according to an internal document viewed by Insider.
But Ye's partnership ultimately ended last month after the artist made repeated antisemitic comments. Adidas cut ties with him on October 25 and said it would immediately bring the Yeezy business to a halt, with the company expecting its bottom line to take a $247 million hit for the year.
"Adidas does not tolerate antisemitism and any other sort of hate speech," the company said. "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.
David Swartz, a Morningstar analyst, called the end of the deal significant but said that the long-term impact on the brand is less clear, given Adidas owns its Yeezy designs and the company remains more of a sportswear than a streetwear brand. He noted that for Adidas and its competitors, China remains a bigger problem than any single endorsement deal because Western brands are falling out of favor with Chinese consumers.
Analysts expect Nike to get a short-term boost, given its dominance of the market for hyped sneakers.
"If all of a sudden that customer who was buying a couple pairs of Yeezys every year now finds themselves with a few 100 extra dollars in their budget every year, the most likely direction they're going to go with that money is Nike: the Jordans and the Dunks," Tom Nikic, a Wedbush analyst, previously told Insider.
But Adidas could already be positioning itself to reignite its popularity with the most influential sneaker collectors.
This week Adidas confirmed speculation and named the former Puma CEO Bjørn Gulden the next CEO of Adidas. Among Gulden's accomplishments at Puma: building the brand's credibility with celebrities ranging like Rihanna and Jay-Z.
"We think this is one of the best hires they could make," Nikic wrote in a note to investors.
Below is a timeline of Ye's relationship with Adidas.
Steve Mack/Getty Images
Adidas and Kanye West announced their partnership in November 2013 after West said he severed his deal with Nike because the company refused to pay him royalties on Yeezy sales. West appeared to break the news of his new deal with Adidas on a New York City radio station.
"Nike told me, 'We can't give you royalties because you're not a professional athlete,'" West said on Hot 97. "I told them, 'I'll go to the Garden and play one-on-no-one.' I'm a performance athlete."
Adidas ended 2013 with North American sales down 1%.
Matt Jelonek/Getty Images
Anticipation started to build for the debut of West's first sneaker with Adidas. Despite rumors of a potential summer or fall launch, the shoe, later known as the Yeezy 750, would not be released until 2015.
Nike, however, shocked sneakerheads everywhere by quietly dropping its final collaboration sneaker with the rapper — the Nike Air Yeezy 2 "Red October" — in February 2014. The $245 shoes sold out in just 11 minutes, according to the Portland Business Journal. The sneakers, which were bright red and featured a strap on top, resell in most sizes on StockX and Goat for over $15,000 a pair.
Getty/Valerie Macon
After much anticipation, West and Adidas released their first collaboration sneaker — the Yeezy Boost 750 in February 2015. The Yeezy 750 featured a suede upper, mid-foot strap, and full zipper running up the back heel.
2015 also marked the debut of the Yeezy 350 model in multiple colorways, including the infamous "Turtle Dove" sneaker. The 350 shoes featured both Adidas Primeknit woven technology on the upper part of the shoe and Boost, an extra layer meant to add comfort to the midsole.
Overall, 2015 was a great year for West. Footwear News named the Yeezy Boost 350 shoe of the year, and he was named one of Time magazine's most influential people. He brought much-needed hype to Adidas' original sneakers like the Ultraboost.
In 2015, Adidas would launch its Confirmed app for sneakerheads to get the latest hype sneakers from the brand.
Jonathan Leibson/Getty Images
As the popularity of West's Yeezy line grew, Adidas struck a new deal with the rapper and designer to run through 2026. Adidas would describe the deal as the "most significant partnership between a non-athlete and a sports brand."
For its efforts, Adidas in December was named sports business of the year by Yahoo Finance after the company reversed a streak of US market-share losses. In addition to Yeezy, Adidas had found success with the Ultraboost and NMD sneaker models. Both were popular with fans because of their comfort and modern look.
Stadium Goods
Yeezy dropped the "Wave Runner" 700, a chunky, multicolor sneaker, for a retail price of $300 in the summer of 2017. The shoe, which implemented Adidas's new Boost technology, became one of the most popular Yeezys ever released thanks to its "dad shoe" silhouette.
Adidas also officially passed Nike's Jordan brand and became the No. 2 sneaker brand by market share, according to NPD Group. Nike, the industry leader, remained at No. 1.
Meanwhile, in a sign of his faith in Adidas, West gifted his then wife, Kim Kardashian, $200,000 of Adidas stock for Christmas.
Saul Loeb/AFP via Getty Images
In May, West said slavery "sounds like a choice" during an interview with TMZ. While West had always pushed the envelope with his music and other projects, this was the first time Adidas CEO Kasper Rorsted had to justify the company's relationship with the artist.
"Kanye has helped us have a great comeback in the US," Rorsted said on CNBC's "Squawk on the Street." "There is no doubt the Yeezy brand has a fundamental impact on our overall brand."
Ye also visited President Trump at the White House in a "Make America Great Again" hat and partially credited him for his move to Adidas. "You gave me the heart to go to Adidas. This Adidas thing made me a billionaire," West said.
Brad Barket/Getty Images for Fast Company
With the popularity of Yeezys climbing, the company's first annual "Yeezy Day" ignited a frenzy on social media. Many sneakerheads ended the day frustrated about not getting their favorite hyped pairs. West would publicly call out Adidas three years later for creating Yeezy Day without his approval.
Adidas Yeezy sales topped $1 billion for the first time in 2019, hitting $1.3 billion.
The success of the Yeezy line prompts West to want to take his relationship with the brand to the next level by becoming its creative director.
Thanks largely to the Adidas partnership, West went from $53 million in debt in 2016 to earning $150 million (pretax) roughly three years later.
Randall Hill/Reuters
Adidas sold nearly $1.7 billion in Yeezy products in 2020.
In September, West asked for a seat on Adidas' board of directors and said he'd wear Jordans until it happened.
Ye also announced on Independence Day that he would run for president. Federal Election Commission documents filed by the celebrity in October showed he valued his three businesses, Yeezy LLC, Yeezy Apparel LLC, and Yeezy Footwear LLC, at $50 million each.
West also disclosed that his financial relationship with Adidas is worth between about $25 million and $50 million, but reports indicated he was making well over $100 million a year just off royalties from Adidas.
Flight Club
By the end of 2021, Adidas North American sales jumped 17% to $5.1 billion. The company's Yeezy line remained its most-hyped product in a celebrity lineup that included Beyoncé, Pharrell Williams, and as of March, Bad Bunny.
West, who officially changed his name to Ye in 2021, was also involved in a notable legal battle involving his Yeezy "Foam Runner" design.
The "Foam Runner" debuted unexpectedly in summer 2020 and quickly became a must-have casual-footwear item. Similar to the Yeezy Slide, the "Foam Runner" became popular for resellers looking to flip Yeezys, as both sold for under $90 retail and could go for double or triple the price on secondary markets.
Ye would sue Walmart in June for selling knockoff versions of the shoe priced at around $20 to $30. Both parties later settled for an undisclosed amount.
StockX
Ye accused Rorsted of ripping off his Yeezy Slide design to create the company's Adilette slide. The rapper later took to social media to call them "a fake Yeezy" and demand Rorsted speak with him.
"I'm not standing for this blatant copying no more," he said on Instagram. "To all sneaker culture To every ball player rapper or even if you work at the store This is for everyone who wants to express themselves but feel they can't cause they'll loose their contract or be called crazy."
Daniel Karmann/picture alliance via Getty Images
Ye's feud with Adidas and Rorsted escalated, with Ye mocking Rorsted after the executive announced plans to retire at the end of 2022. The rapper and designer posted a fake New York Times cover story on his Instagram, with the headline "Kasper Rorsted also dead at 60."
Soon after, Ye told a Bloomberg reporter he planned to end his existing corporate partnerships and "go it alone." Days later, Ye ended his deal with Gap.
MEGA/GC Images
Adidas announced its relationship with Kanye West was under review after a series of public comments the rapper made against the company.
Ye also sparked outrage after he wore a "White Lives Matter" T-shirt on October 3 during Paris Fashion Week. Days later, Twitter and Instagram closed Ye's accounts after he posted antisemitic remarks.
As Adidas began to face mounting public pressure to drop Ye, the rapper told hosts of the "Drink Champs" podcast, "The thing about me and Adidas is like, I can literally say antisemitic s**t, and they can't drop me. I can say antisemitic things, and Adidas can't drop me. Now what? Now what?"
Adidas had explicit ties to Germany's Nazi party in the past. The German sportswear giant would eventually terminate its deal with Ye on October 25, saying it "does not tolerate antisemitism and any other sort of hate speech." The meeting in which Adidas executives decided to cut ties with Ye lasted just two minutes, Bloomberg reported.
In a statement, Adidas said it expected its bottom line to take a $247 million hit for the year. It also pulled remaining Yeezy products from shelves. Retailers, including Foot Locker, also pulled Yeezy products per Adidas' request.
Daniel Karmann/Getty Images
Adidas confirmed in a statement that its new CEO will be Bjørn Gulden, a former top executive at Puma. Gulden is known for his work with celebrities like Rihanna and Jay-Z, but he'll have his work cut out for him, given Adidas' unique challenges in the wake of the Ye split.
On November 9, Adidas announced quarterly earnings and halved its earnings forecast for the year, citing the end of the Yeezy partnership and continuing challenges in China. The company also reiterated it owns the designs to all products it created in partnership with Ye and that it plans to potentially release more in 2023.
Contributer : Business Insider https://ift.tt/4i8F2ZB
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Thursday, November 10, 2022
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