After weeks of silence, Adidas ( ADDYY ) has officially cut ties with rapper Kanye “Ye” West following his antisemitic remarks— but is it too little, too late?
“Adidas has really broken the trust of their customers,” Angeli Gianchandani, resident practitioner at the University of New Haven, told Yahoo Finance Live (video above), stressing that the German brand now needs to fix the its reputation.
“The ability to communicate quickly and get in front of a crisis is important,” he continued. “Your brand is your hero. That’s your voice. That’s your messaging. So if you’re going to do any kind of partnership, you really have to evaluate the risk at hand. … Branding is about creating of a value proposition — anything and everything interacts.”
Gianchandani surmised that current financial implications played a factor in the company’s delayed response, explaining: “We’re in the fourth quarter — everyone is racing to get to December and sales are really stressed. It could have been a priority them before they make a decision to really communicate what their brand values are and where they stand.”
Adidas cut ties with Ye on Tuesday morning after the rapper-turned-designer continued to make antisemitic comments and said the company could not end their partnership.
In a statement, the German company wrote: “Adidas does not tolerate antisemitism and any other kind of hate speech. Ye’s recent comments and actions are unacceptable, hateful and dangerous, and they violate the values of the company of diversity and inclusion, mutual respect and fairness.”
Adidas’ decision follows several high-profile brands taking a stand against the controversial rapper, including Balenciaga, Gap, CAA, and others.
Adidas said it will lose $250 million in revenue this year as a result of the decision. The stock fell 3% on the news and is down nearly 65% year-to-date.
The company’s lucrative Yeezy arrangement began in 2013 and was originally set to expire in 2026. Morningstar analyst David Swartz estimated that annual Yeezy sales would add up to about $2 billion — which makes up about 10% of Adidas’ total sales.
However, not all analysts think that the death of the relationship is a bad thing.
“At the end of the day, it’s going to be better for Adidas,” said Sam Poser, senior equity analyst at Williams Trading, noting the volatility in Ye’s behavior.
At the same time, Poser noted that the company will experience short-term revenue losses along with inventory growth, profit warnings, and poor performance in greater China, the brand has a long way to go.
“This is coming at a difficult time for the company,” Bernstein Analyst Aneesha Sherman told Yahoo Finance Live recently. “They had their second of two early earnings releases and guide-downs for the year. They expect Q4 to come in at negative profitability anyway… and this $250 million will further cut the bottom that line for Q4.”
Going forward, Gianchandani suggested Adidas should focus on expanding its portfolio, enhancing its in-house design team, and acquiring other influencers and partnerships to cater to the Gen-Z consumer.
Alexandra is a Senior Entertainment and Food Reporter at Yahoo Finance. Follow him on Twitter @alliecanal8193 and email her at [email protected]
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