Adidas Bails From Yeezy. Why That Packs a Punch.

Times are tough at


Adidas


The German company has too much inventory and falling China sales. It’s slashed guidance, and earnings ran about half what Wall Street expected. The stock is down by more than 60% this year. This past week, Adidas abruptly said it was ceasing production and distribution of rapper Kanye West’s Yeezy fashion line—mostly sneakers—after he made anti-Semitic comments. The immediate hit: 250 million euros ($246.4 million).

It gets worse, says Wedbush analyst Tom Nikic, who sees another €350 million blow to net income in fiscal ‘23. Adidas didn’t disclose Yeezy sales, but Nikic estimates they were as high as 9% of the $23 billion revenue company. He cut his rating for the stock to Neutral from Outperform, and his target to €102 from €130.