Can Adidas refocus after chaos with Kanye?

Great Britain – Adidas, stung by the termination of its connection with the artist formerly known as Kanye West, needs a new focus but should be more strategic in its pursuit of new celebrity alliances, according to industry analysts.

Incoming chief executive Bjorn Gulden defended the company’s decision to sever relations with the rapper, known as Ye since 2021, on Wednesday, March 8, while also highlighting the unique significance of the Yeezy shoe brand, which has become a key earnings generator.

For decades, sportswear companies have partnered with celebrities in lucrative but possibly hazardous relationships. Gulden told reporters on Wednesday that Adidas would continue to partner not only with athletes but also with celebrities and artists.

“It’s not an either/or situation; you must do both,” he remarked. You develop credibility as a performance brand by associating with athletes, but there are relatively few athletes with whom you can engage in lifestyle partnerships.

Gulden did hint at a shift in focus at Adidas, stating that the firm must refocus on its core.

“You will see us invest in additional sports and become even broader than before, as that is also in the company’s Nature,” he said.

Adidas has warned of a probable 700-million-euro operating loss this year as a result of severing relations with Ye. Gulden, who became CEO on January 1, has vowed to turn the company around.

Adidas had not previously disclosed the revenue produced by Yeezy, which the firm described in 2016 as “the most significant collaboration ever formed between a non-athlete and an athletic brand.”

Six years after praising Ye as a “creative pioneer” with “visionary creativity,” Adidas severed ties with him, citing “unacceptable, hostile, and harmful” social media and interview comments beginning in October of last year.

According to Cristina Fernandez, a senior research analyst at Telsey Advisory Group in New York, Adidas might use this incident as a learning opportunity to be more selective in choosing celebrity partners and to diversify its bets.

“From my perspective, it’s about variety, but also about that particular star or athlete not being as dangerous as this one.”

The 38-year connection between American sportswear company Nike and Michael Jordan for the Air Jordan line of basketball shoes and apparel is an example of a long-lasting and lucrative alliance.

The Jordan brand generated $5.1 billion in revenue during Nike’s fiscal year 2022, a 7% increase over 2021, according to the company’s annual report for 2022.

Adidas has collaborated with superstars such as Beyonce, Pharrell Williams, Stella McCartney, and Rita Ora, and established a new label with actor Jenna Ortega last month. But, the Yeezy brand has been the most successful.

Mario Ortelli, managing director of luxury and high-end retail advice business Ortelli & Co., stated, “Partnerships with celebrities play a significant role, but there is a risk because the person you collaborate with can go off the rails.”

Ortelli stated that Adidas’ celebrity ties and collaborations with companies such as Balenciaga, Gucci, Prada, and Moncler had caused the company to spread itself too thin.

Due to the epidemic, according to Gulden, brand partnership announcements were delayed, resulting in their release in short succession.

“In the future, we will collaborate with brand partners, but probably not four within 18 months,” he stated.

Overall, investors have faith in Gulden, a former CEO of neighboring competitor Puma, to turn around Adidas: the company’s stock has gained 23% since his appointment on November 8.

Ortelli stated that the CEO of Puma came from a period of phenomenal success. Let’s see whether he can replicate his success at Adidas.

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