Tubig

2y

From the beginning, there were plenty of warning signs that Adidas AG’s collaboration with the rapper Ye was destined for debacle. But for anyone still unsure of the trajectory, the wake-up call came on the morning of May 3, 2018. Kanye West, as he was then called, had just suggested to celebrity gossip site TMZ’s newsroom that Black people in America had made a choice to remain in slavery for 400 years. Amid the outcry, Adidas’s shares plunged, calls for boycotting its sneakers grew, and Chief Executive Officer Kasper Rorsted appeared to do all he could to avoid tackling the subject head on. In a Bloomberg TV interview that day to discuss Adidas’s recent earnings, Rorsted said he wouldn’t speculate about every statement from all of his company’s external partners. “He’s been a fantastic creator,” Rorsted said, “and that’s where I’m going to leave it.”

Except Rorsted couldn’t leave it at that—not for a minute of TV time, much less for the four years leading up to this fall. Had there been any talk at Adidas within the past 24 hours, a TV anchor wanted to know, about cutting ties with the rapper and designer?

“No,” Rorsted curtly responded.

Last Tuesday, Adidas finally did cut ties with Ye, weeks after Gap Inc. had done so and days after a similar move by Kering SA’s luxury fashion line Balenciaga. The divorce was particularly significant for Ye because the deal had been his longest-running and most profitable corporate partnership. But it also could have major financial implications for Adidas, which had scored a huge win with the Yeezy line of sneakers and streetwear. The styles inspired by the rapper and social media star helped the company—long a leader in footwear and gear for sports such as soccer—to attract a young, hip international clientele that cares more about Instagram postings than instant replays. That cachet, and the premium pricing it allowed, has paid off: Morgan Stanley a***yst Edouard Aubin estimates that the Yeezy line has been generating €1.8 billion ($1.8 billion) in annual sales, about 8% of Adidas’s total revenue and more than 40% of the company’s profits.

Adidas And Gap End Partnerships With Ye, After His Antisemitic Comments
An Adidas store in New York.Photographer: Spencer Platt/Getty Images
Adidas had appeared to resist calls for ending the relationship in the face of Ye’s growing string of controversies that culminated with a spate of antisemitic remarks in October on podcasts and social media. Only when global calls for terminating the partnership reached seemingly unbearable levels did Adidas finally announce the split.

Within Adidas, there are mixed feelings about the slow reaction. Some of the company’s top executives hesitated because they first wanted to obtain opinions from outside law firms in the US that if Adidas went ahead with the termination of the Ye partnership, it wouldn’t be deemed as an obstruction of an ongoing court mediation process, according to people with knowledge of the matter. Still others disagreed with that stance, feeling that Ye’s behavior had become so offensive that it merited immediately cutting ties.

Outside the company, the delay left the public to draw its own conclusions about Adidas’s motivations. Ultimately, the company on Oct. 25 released a statement denouncing Ye’s actions as “unacceptable, hateful and dangerous,” adding that they violated the company’s values of “diversity and inclusion, mutual respect and fairness.” Beyond that, Adidas has stayed silent, saying it will fill in more details of the Yeezy breakup and future of the partnership’s shoe designs when it delivers quarterly earnings on Nov. 9. Adidas declined to comment for this story.

“What was not in that press release is what they are going to do next and how they could learn from this,” says Lauren Compere, managing director and head of stewardship and engagement at Boston Common Asset Management, a longtime Adidas investor. “Frankly, this is a misstep from the company.”

To understand why Adidas might have waited weeks to renounce Ye’s unacceptable behavior, it helps to recall just how far behind Nike Inc. it had fallen in the decades since basketball’s Michael Jordan soared to global fame in the 1980s and ’90s. Rorsted’s predecessor, Herbert Hainer, set his sights on closing that gap in the 2000s, at first by spending $3.8 billion to acquire Reebok. When that strategy failed, Hainer shook up his brand management team and promoted a young executive named Eric Liedtke in 2014. Liedtke spearheaded the push for high-profile outside partners, tying Adidas to nonathlete celebrities such as Pharrell Williams, Beyoncé and Ye.

Even from the start, Adidas executives were warned that working with Ye could be miserable. Nonetheless, they expanded the Yeezy product line in 2016 with an agreement calling for footwear, apparel and accessories—along with Yeezy-focused retail stores. The effort would be led by a dedicated Adidas team, based from the company’s North American headquarters in Portland, Oregon.

While many hoped Liedtke would take over as CEO, Adidas ultimately replaced Hainer in 2016 with Rorsted, a hard-charging tech industry veteran who’d once played for Denmark’s youth national handball team. Rorsted was already a darling of the German corporate world, having posted record profits during his stint as CEO of soapmaker Henkel.

Rorsted’s initial years at Adidas were golden. The share price soared thanks to fast-selling lifestyle sneakers like the Stan Smith and Superstar shoes, as well as the high-priced, red-hot Yeezy kicks. Ye appeared to be generally happy with the arrangement, too, and an inspiring figure to many of the young designers working on the Yeezy brand. For a while, many of these twentysomethings were willing to put up with Ye’s round-the-clock demands and sometimes unprofessional behavior, according to an Adidas employee who spoke on the condition of anonymity.

Beneath the surface, there were signs of trouble. Even Adidas workers who’d admired Ye began to sour on him by 2018, when the rapper donned a “Make America Great Again” hat signed by Donald Trump—and then made his screed on slavery before the TMZ newsroom. That same year, Ye moved with his then wife, Kim Kardashian, and their kids to a ranch in Cody, Wyoming. Some of the 90 or so Yeezy-assigned workers relocated to Wyoming to work at a facility that Ye had demanded, which required transporting millions of dollars in machinery. The facility closed within six months, the person says.

Meanwhile, a series of crises engulfed Adidas headquarters in Herzogenaurach, starting with Liedtke’s decision to leave Adidas at the end of 2019. Then came the pandemic, which kicked off a series of other mistakes. First, Rorsted had to apologize and reverse a decision to refuse to pay rent at stores shuttered because of Covid-19 lockdowns. In the US, employees began protesting what they believed to be Adidas’s tendency to marginalize minorities, particularly Black workers. The discord intensified after the murder of George Floyd by a White police officer. Among the complaints was Adidas’s continued silence on the growing list of controversial statements from Ye. Rorsted replaced the company’s HR chief and went on an employee listening tour, an experience he described as “humbling.”

Adidas faced another blow after taking a stand on cotton sourced in the Xinjiang region of China, which had drawn foreign scrutiny after reports of forced labor. That touched off consumer boycotts in China of Western brands in 2021, which haven’t let up. Consumer companies like Adidas and Nike are still struggling to hire Chinese celebrities to market their products—with local brands rapidly gaining market share. That left Adidas even more reliant on the Yeezy brand to hit financial targets. And because of the Ukraine war, Adidas has pulled out of Russia, one of the few major countries where it’s long dominated Nike. Adidas has issued two profit warnings in the past few months.

Bazooe

2y

I genuinely don’t believe this lol

hoopsplayer21

2y

did they take out the elon smiley too?

frenchpress

2y

8% revenue 40% profits is crazy they producing these for pennies dawg

YANDHI

2y

They’re saying profits not revenue. It’s 8% of revenue but seemingly seems like the main aspect of the company pulling big profits.

Honestly that’s kinda believable. What in the main adidas line is selling like that?…most of the hype of the originals and even their newer models fell off years ago and their other partner sales aren’t nearly as dominant. Like the article says they also lost out on other big markets that used to help a lot

u ok jay

2y

so funny, i literally f***ed w adidas so hard just because of yeezy since 2015. imma fw whoever yeezy is working with 🤷‍♂️

DiorRunners

2y

Adidas was nothing in this country before Kanye. Almost puma tier tbh

pussy bacon

2y

That can't be true

DiorRunners

2y

Adidas was nothing in this country before Kanye. Almost puma tier tbh

u ok jay

2y

yeah and Gap was even worse off than that beforehand

Tooooooooooot

2y

Every white person owns a pair of Stan Smiths

Ralo

2y

do you know how massively popular Yeezys are?