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25 Dec

No. 6: Ye Loses the Fashion World

For Ye, the musician and artist formerly generally known as Kanye West, 2022 has been a 12 months of turmoil.

Three major multimillion-dollar collaborations were extinguished, his divorce from Kim Kardashian was finalized and a firestorm of criticism was directed at him for repeated controversial remarks, including antisemitic ones.

His deals with Gap, Adidas and Balenciaga have all dissolved previously three-and-a-half months, with major impact on the companies of the U.S. retailer and German activewear brand. Not considered to be among the many more versatile entrepreneurs whose golden touch may benefit various products and industries, the 24-time Grammy winner found himself ostracized from the style industry that he had tried for years to be taken seriously by.

Where things go from here for the beleaguered celebrity is anyone’s guess. There have been rumblings that Ye is attempting to get his design game going again. Making any inroads with major chains could be almost unattainable at this point. Major retailers like Foot Locker canceled orders for his collaborative designs in response to the recent controversy.

As for the prospect of the musician teaming up with one other brand or trying the direct-to-consumer route, Morningstar equity analyst David Swartz, said, “Yeah, good luck with that. At this point, he’s completely toxic. Who’s going to work with him? I don’t think anybody…goes to need to go into business with any individual who praises Adolf Hitler in interviews.”

The parade of models on the Adidas Originals Kanye West by Yeezy Season 1 show.

Steve Eichner

Attorneys for Ye at Cadwalader, Wickersham & Taft LLP didn’t acknowledge requests in search of an update about any outstanding legal disputes related to the three collaborative projects that ended this 12 months.

Wassner Management Group’s chief executive officer Cole Wassner also doubted the likelihood of a Ye comeback. “It might have been one thing if he had come out after the whole lot [happened] and apologized. But he’s doubled, tripled and quadrupled down and he keeps still taking place the identical path. He’s anti-matter. He’s mainly turned his name into kryptonite,” Wassner said. “It’s a poison pill for any retailer to attempt to work with him in any form at this point. Any brand that wishes to the touch him takes on the bags of neo-Nazism at this point.”   

The musician, who revealed a bipolar disorder diagnosis in 2016, has faced controversy through the years but that intensified this past fall. After walking in Balenciaga’s spring 2023 show in Paris in October, Ye later hosted a surprise show for his YZY Season 9 collection within the eighth arrondissement. There he wore a T-shirt imprinted with “White Lives Matter” and described himself as unmanageable in a gap monologue. He also dressed models in T-shirts with a photograph of Pope John Paul II on the front and “White Lives Matter” on the back.

He faced a firestorm of public backlash. The artist responded with a litany of attacks directed at fashion editors, former friends and even luxury mogul Bernard Arnault. After being suspended from Instagram and Twitter for violating the platforms’ respective policies on hate speech, Ye said he had agreed to purchase the social media platform Parler.

A Yeezy Gap Engineered by Balenciaga look.

A Yeezy Gap Engineered by Balenciaga look.


(Despite making a joint statement about mutually agreeing to a deal in October, Parler’s parent company Parlement Technologies said earlier this month that each parties had parted ways and nixed that plan.)

Within the weeks that followed Endeavor’s chief executive officer Ari Emanuel, in an op-ed in The Financial Times, called on the Grammy winner’s business partners to drop him. CAA later parted ways with the musician, as did MRC, which had wrapped up a documentary about him. Vogue, which had featured the musician and Kardashian on its April 2014 cover, also publicly distanced itself from the entertainer.

After initially taking the matter of its partnership with the Yeezy brand “under review” in early October, Adidas officially revealed its decision to stop working with Ye in late October. The athletic juggernaut did so then amid mounting public pressure and calls for a consumer boycott. By ending what was purported to be a 10-year partnership, Adidas took a major financial hit. The corporate stated that it stands to lose as much as 250 million euros in net profit consequently.

Last 12 months, Yeezy products helped Adidas ring up nearly $2 billion in sales, or about 8 percent of the corporate’s total revenues, in accordance with Morgan Stanley.

Morningstar’s Swartz suggested that in the long term the damage to the brand and the impact on Adidas’ earnings won’t be as significant as some people think it can be. Noting how the corporate will not must pay annual royalties upward of $100 million and can likely reduce staff to save lots of other costs, he said the brand also has other celebrity endorsements, including with Beyoncé’s Ivy Park line and Pharrell Williams, which could help it make up for lost sales. Adidas also could sign latest ones.

Nonetheless, the fourth-quarter impact on Adidas might be “pretty substantial” if last 12 months’s plan was any indicator — 10 of the 65 Adidas Yeezy drops were released in that timeframe, he said. “In 2023 and beyond, they’ll make up for it to a point,” Swartz said. “This probably isn’t the largest problem for Adidas without delay, despite the media attention. The most important problem for them is China, where their sales have fallen off a cliff,” he said, citing COVID-19, slave labor issues and the lack of market share to native brands as explanation why.

Although Adidas made it clear that it can not work with Ye and can not use the Yeezy brand, some Yeezy designs are expected to surface within the months ahead under the Adidas logo. In an earnings call, Adidas chief financial officer Harm Ohlmeyer noted that the corporate is the only owner of all design rights registered to existing product. “We intend to utilize these rights as early as 2023,” he said.  

But Tom Nikic, senior vp of equity research for attire and footwear at Wedbush Securities, said the brand’s plan to release Yeezy designs under the Adidas logo might be tricky since among the allure of the styles may not resonate as much given Ye’s public statements. “And so they do run the chance of getting some public relations issues if it looks like they’re still putting out sneakers that were designed in collaboration with any individual who made numerous antisemitic statements,” he said.  

The daddy of 4’s and Adidas’ problems were compounded late last month when a Rolling Stone article alleged that greater than 12 former Adidas and Yeezy staffers said Ye had created a toxic environment for many who worked under him on the Adidas-Yeezy line. The staffers said management was aware of the rapper’s behavior, which reportedly included showing porn videos at meetings and, again, making antisemitic comments.

Adidas was only considered one of the brands that moved to distance themselves from the controversy. Because the musician’s public comments became more outrageous, Kering in late October said Balenciaga had parted ways with Ye and the brand faraway from its website the image of him walking in its spring 2023 show. Accentuating the separation, Kering told WWD on the time that the corporate didn’t have any plans for future projects related to the artist. Balenciaga designer Demna — who was engulfed in his own controversy earlier this month related to 2 advertisements by the French fashion house — had also worked with the musician on the Yeezy Gap Engineered by Balenciaga line, in addition to several of Ye’s own projects.

Even before the backlash against him had begun, Ye and his attorneys had moved to distance themselves from Gap. The musicians’ attorneys reportedly sent a breach-of-contract notice to Gap executives in mid-August and by mid-September the contract was reportedly terminated. Ye alleged the retailer “abandoned contractual obligations” — namely for not selling YZY products in its stores and for not opening stores to sell Yeezy items.

After his controversial comments, Gap in late October issued a press release referencing how in September it had said it was ending the Yeezy Gap partnership, and the way its former partner’s recent remarks and behavior further underscored why. It also removed Yeezy products from its stores and shut down the YeezyGap site at the moment.

That separation was said to have left Gap with nearly $102 million price of unsold merchandise, in accordance with a source accustomed to the situation, who requested anonymity. There was said to still be between 8,000 and 12,000 units of about 73 styles available last month that were being shopped around unsuccessfully to major discounters, including Burlington, T.J. Maxx, Citi Trends and Ross Stores.

Asked last month what’s going to turn out to be of all of the Yeezy inventory, a Gap spokesperson referenced a transcript of its third-quarter earnings announcement and said, “We don’t have anything more to share beyond that.” The corporate’s third-quarter earnings call noted that “Gap brands might be up against an approximate one point headwind as we anniversaried Yeezy Gap sales last 12 months that is not going to be in the bottom this 12 months.” That was among the many aspects that the corporate cited as to why fourth-quarter sales might be down by mid-single digits year-over-year.

Gap also noted how gross margin within the third quarter was 37.4 percent, deleveraging 470 basis points versus last 12 months, inclusive of 130 basis points of deleverage related to a $53 million Yeezy Gap impairment charge.

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