It’s the end of an era: Beyoncé and Adidasthe world’s second largest sportswear brand, mutually agree to part ways. Ivy Park sales fell more than 50% to $40 million in 2022, well below the 250 million anticipated by Adidas. This has prompted a profit warning for investors as the brand tries to climb out of its billion-dollar hole and focus on core products.
The breakdown you need to know:
CultureBanx reported that Adidas’ main problem has been its strategy in recent years, centered on partnerships with other artists, such as Bad Bunny, Pharell Williams and rapper Ye (aka Kanye West). Only one of those associations consistently met or exceeded its financial expectations.
Specifically for Ivy Park, in 2021 revenue was $93 million, in 2022 revenue was $40 million vs. $250 million forecast. In 2023, revenue is projected to be $65 million, far from the target of $335 million, according to the Wall Street Journal. Adidas’ contract with Beyoncé pays her $20 million a year and was due to expire at the end of this year.
Icy Association:
“Adidas has all the ingredients to be successful, but we need to refocus on our core: product, consumers, retail partners and athletes.” stated Bjørn Gulden, CEO of Adidas, on his earnings call in early March.
There have been major creative differences between Ivy Park and Adidas, and Beyoncé, according to hollywood reporter. Perhaps for this reason, the CEO of Adidas declared that athletes, and not artists, should be the center of attention.
Overall, though, it’s been a rough ride for the sportswear and footwear company. which projects an operating loss of 700 million euros in 2023. It would be the first annual loss for Adidas in 31 years.
Situational awareness:
Let’s not forget that Adidas has $750 million worth of Yeezy-branded inventory that it may never sell, after breaking up with Ye. Earlier this month, the company reported a large fourth-quarter loss and slashed its dividend following the costly end of its partnership with Ye’s Yeezy brand in October 2022.
