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Adidas has received a boost of around €100mn to its operating profit after it unwound a previous provision relating to outstanding legal issues following a scandal with the group’s former partner Kanye West.
Chief executive Bjørn Gulden said on Tuesday that the German group, the world’s second-largest sportswear maker, had struck a settlement with West two years after falling out with the rapper, also known as Ye, over a string of antisemitic remarks.
In October 2022 Adidas ditched its fast-growing and lucrative Yeezy line of sneakers, which were designed by Ye, after the remarks. At the time, Adidas said that it did not “tolerate antisemitism and any other sort of hate speech”. The move would eventually wipe out €1.2bn in annual sales and €500mn in operating profit.
Gulden said that the group would donate to charity an amount equal to its unwound €100mn provision.
When Gulden joined Adidas from rival Puma in early 2023, the group had been contemplating destroying €1bn of unsold Yeezy stock and writing them off. Instead, Gulden decided to sell them and donate parts of the proceeds to charity.
Including this €100mn the total funds which are earmarked for charity now stand at about €250mn, the company said. Last year Adidas set up an independent non-profit foundation to oversee the distribution of those funds to promote “social and environmental progress”.
Adidas and West had previously alluded to disputes without providing any detail. Gulden said on Tuesday that both sides agreed to drop their respective claims against each other in the settlement, which was struck in the third quarter and does not include a payment from Adidas to its erstwhile partner.
“There was no payment,” he said, adding that there had been “different claims going in both directions” but declining to comment further except to say they have all been dropped.
The news came as Adidas reported strong sales growth in China and the US in the three months to September, once Yeezy sales made in the prior year were stripped out for comparison in the latter. Sales in the quarter rose 7.3 per cent to €6.4bn while operating profit was up 46 per cent year-on-year to €598mn.
“The third quarter was a very strong quarter for us and again better than expected,” said Gulden.
Earlier this month, Adidas raised its full-year guidance for the third time this year. The group now expects a 10 per cent year-on-year increase in sales excluding currency swings and €1.2bn in operating profit, up from €268mn in 2023.
The uptick is the latest confirmation that a turnaround under Gulden is maintaining pace, with the group having been boosted over the past year by the popularity of its Samba and Gazelle sneakers, which have turned into fashion icons.
Shares in Adidas, which were up 0.6 per cent to €215 on Tuesday lunchtime, have gained almost 30 per cent over the past 12 months.
Gulden said that Adidas will sell the remaining stock of leftover Yeezy sneakers by the end of this year, adding that this will be the final chapter of the relationship: “There [are] no open issues between us [left]”.
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