Adidas got rid of their Ye problem this week, dumping the artist formerly known as Kanye West, but upon further review, they still have some issues related to him. Specifically, what to do about the demand that will still exist for Yeezys.
They have a plan. They intend to sell the existing product they are holding on to with their own branding starting in 2023.
Here’s what analyst Morgan Stanley told his clients about the divorce of the two entities.
“Looking ahead, on our understanding, the company will not sell any Yeezy-branded products and all Yeezy products will be branded under the Adidas brand.”
A Bloomberg report pointed out that not having West as a partner will have some positive ramifications business-wise. They were feeling the heat for demand decreasing in China. And because of Ye’s volatility, there were constant production delays.
Here’s a quote from RBC analyst Viral Daphnia in the Bloomberg story.
“Adidas has the rights to existing Yeezy product designs and can sell these using Adidas branding (not Yeezy branding) following the termination of the Yeezy partnership, which Adidas intends to do” in the first quarter of next year, RBC analyst Piral Dadhania said in a note. “Speaking to the company, it believes it can limit the loss of revenues through this strategy and will also save on expenses related to royalty and marketing fees no longer payable in 2023.”
Remember that Adidas owns the design rights to Yeezy, as they pointed out in a statement.
“Adidas is the sole owner of all design rights to existing products as well as previous and new colorways under the partnership.”
The deal with Ye was supposed to run for at least the next three years. The Adidas stock price fell 3.2% this week.
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