Adidas AG's (OTCQX:ADDYY) doomed collaboration with cancelled US rapper Kanye West, aka Yeezy, remains a significant burden for the German sportswear brand, according to Barclays.
In a research note, Barclays analysts predicted ongoing write-down headwinds to feature in adidas’ upcoming third-quarter results.
Adidas launched its Yeezy footwear range in 2015, when Kanye was at the height of his popularity.
As one of the world’s most successful musical artists, Kanye’s name power made Yeezy shoes a gigantic cash cow for adidas, accounting for up to 8% of total group sales at the collaboration’s peak.
Forbes went as far as to call it “one of the great retail stories of the century”.
That collaboration infamously came to a screeching halt in 2022 following West’s infamous tirade of antisemitic remarks, turning this great retail story into an unmitigated disaster for adidas.
In the fall-out, Adidas warned of a €250 million profit hit from the termination in 2022 alone, but the ongoing overhang means more pain is to come.
Barclays analysts expect inventory write-downs and other associated costs to wipe out any chance of a profit from the estimated €300 million of Yeezy sales in the period.
“Yeezy is likely to be significantly dilutive to North America sales,” said analysts. So much so, that they expected North American sales to contract 1%.
Globally speaking, Barclays predicts 11% sales growth thanks to European demand. Excluding Yeezy, that global sales growth is tipped to come in at 14%.
Barclays has kept its third-quarter earnings per share (EPS) estimate steady at €2.2 and maintains a full-year 2024 EPS forecast of €3.8.
Results are due on 29 October.