Yeezy was a fashion brand that arose from a collaboration between German sportswear company Adidas and entrepreneur and music artist Kanye West.
The first product to be released under the Yeezy brand was a sneaker known as the Boost 750.
Launched in February 2015, the sneakers were soon followed by high-end, limited-edition jackets, track pants, shirts, socks, lingerie, and slippers, among other items.
In the years that followed, Yeezy became a wildly successful brand with Forbes even calling it “one of the great retail stores of the century” in a 2020 article.
While Yeezy inspired a multitude of other brands in the fashion industry and earned revenue in the billions, the collaboration between West and Adidas ended abruptly in October 2022.
Let’s expand on what transpired below and the role that Yeezy’s ownership structure played.
Yeezy’s original ownership structure
In their aforementioned article, Forbes noted that Yeezy was, at the time, a “complicated asset” that West 100% owned but which was tied to Adidas for a period of five years.
Over this period, the sports company was responsible for production, marketing, and distribution.
As part of the deal, West would also pocket a royalty of around 11% once fees and other expenses were deducted.
Adidas and West part ways
Adidas parted ways with West after the rapper made a series of offensive remarks that it could no longer overlook.
The company noted that the decision would cost it around $250 million in net profit and leave it on the hunt for another celebrity to help it compete with its main rival Nike.
Who owns Yeezy now?
Production of Yeezy sportswear ended just as quickly as the royalty payments to West. This left Adidas in a predicament. The company owned the rights to everything associated with the Yeezy brand such as product design, but it did not own the brand name itself.
Post the end of the collaboration, Adidas had to determine how to solve its predicament and also how could it sell its existing inventory.
Complicating the decision was the fact that Yeezy’s profitability as a business had been overstated since costs only included product-related expenses and not the overheads absorbed by Adidas.
In a Fortune article, however, Adidas CFO Harm Ohlmeyer admitted that since the company would save around 300 million euros on royalties and marketing fees, the impact on its bottom line would be mostly mitigated in 2023.
Adidas moves on
In November 2022, Adidas decided to continue to sell products from its inventory without the Yeezy name or branding.
The company appointed the former head of Puma Bjørn Gulden as the new CEO, with Gulden tasked with finding ways to replace the 250 million euros in lost profit and repair damage to the Adidas brand.
Some pundits questioned Adidas’ move to continue to sell the sneakers, arguing that the range would forever be associated with West despite the lack of Yeezy branding.
Key takeaways
- Yeezy was a fashion brand that arose from a collaboration between German sportswear company Adidas and entrepreneur and music artist Kanye West.
- Before the demise of the collaboration, Yeezy was a complex asset with the brand 100% owned by West and Adidas responsible for production, marketing, and distribution over a set period.
- After the demise of the collaboration, Adidas owned everything associated with Yeezy products except the brand name itself. This left them in a quandary with unsold inventory and a 250 million euro hit to their profits. In November 2022, Adidas decided to continue to sell Yeezy products with the name and brand removed.
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