Will Adidas regret their split with Ye?

The road back to normalcy will be much rockier for Adidas than for its longtime rival. Its breakup with rapper and designer Ye, formerly known as Kanye West, over his outbursts ended one of the most lucrative sneaker arrangements in the industry’s history and leaves a gaping hole in the company’s earnings that may be as large as €‎250 million ($251 million). 

Adidas faces crises on multiple fronts as it prepares for a leadership change with chief executive officer Kasper Rorsted on the way out. His successor will now have to figure out how to sell Yeezy designs to customers without the brand name and whether to rethink celebrity partnerships, all while contending with global supply chain snags and declining market share in China.

Adidas became heavily dependent on Yeezy since hitching itself to Ye in 2013. The Yeezy line grew to almost $2 billion in annual sales, or about 8 percent of Adidas’s total revenue, according to analysts. Premium pricing gave the collection high margins, and it represented more than 40 percent of profit at Adidas, according to Morgan Stanley. Executives are expected to tell investors how they plan to mitigate that shortfall on an earnings call on Nov. 9.

Source: Bloomberg