Adidas Ends Kanye West Partnership, Gap Pulls Yeezy Products Over Rapper’s Anti-Semitic Remarks | Kanebridge News
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Adidas Ends Kanye West Partnership, Gap Pulls Yeezy Products Over Rapper’s Anti-Semitic Remarks

Sportswear company’s move ends lucrative arrangement that produced the popular Yeezy collection of sneakers

Wed, Oct 26, 2022 8:49amGrey Clock 4 min

Adidas AG said it would end its partnership with Kanye West and Gap Inc. said it would pull apparel he helped design from its stores, after a string of controversies including a recent anti-Semitic outburst from the musician and fashion-brand owner.

Adidas’s decision, which ends a lucrative arrangement that has produced the popular Yeezy collection of sneakers, comes after weeks of pressure on the German sportswear company from human-rights advocates and after other businesses severed their ties with Mr. West, who goes by Ye.

Gap, which ended its partnership with Mr. West in September but was still selling items it had already produced, said Tuesday that it was removing Yeezy Gap products from its stores and had shut down a website that was still selling hoodies and other merchandise from the partnership.

“Our former partner’s recent remarks and behaviour further underscore why” Gap ended its partnership, the retailer said in a statement.

Mr. West and his representatives didn’t immediately respond to requests for comment. He has publicly complained about Adidas and Gap, accusing the companies of stealing his designs and breaking promises to expand his ventures. He had said that he was key to Adidas’s success. “I can say antisemitic things and Adidas can’t drop me. Now what?” he said in a podcast that aired earlier this month.

In early October, Mr. West appeared at his Yzy fashion show in Paris wearing a “White Lives Matter” shirt, a slogan often used by white supremacist groups, and a week later wrote a tweet that said in part that he planned to go “death con [sic] 3 on Jewish people.”

Film-and-television studio MRC and French fashion house Balenciaga are among companies that have distanced themselves from Mr. West in recent weeks. The talent agency CAA has dropped Mr. West as a client, according to a person familiar with the matter.

On Oct. 6, Adidas put its partnership with Mr. West under review. Days later, Twitter Inc. and Meta Platforms Inc.’s Instagram locked his accounts after he made anti-Semitic posts.

Adidas said Tuesday that Mr. West’s recent comments and actions have been “unacceptable, hateful and dangerous, and they violate the company’s values of diversity and inclusion, mutual respect and fairness.”

The breakup adds another major headwind for Adidas, which has been struggling to grow in China, the largest apparel and footwear market in the world. Adidas is also in the midst of searching for a new chief executive after the company unexpectedly said in August that its current leader, Kasper Rorsted, will step down next year.

“The termination of the partnership with Kanye West is understandable and necessary. Financially, the termination is a heavy blow,” said Ingo Speich, head of sustainability and corporate governance at German fund manager Deka Investment, which holds 0.7% of Adidas. “It remains to be hoped that no further partnerships will be lost.”

Adidas said it would terminate the partnership immediately, end production of Yeezy branded products and stop all payments to Mr. West and his companies. The decision is expected to have a short-term hit of up to €250 million, equivalent to $247 million, on the company’s net income in 2022, the company said.

Adidas shares fell more than 3% in Frankfurt trading Tuesday. They are down more than 60% this year.

Over the weekend, protesters in Los Angeles held a banner above a major freeway expressing support for Mr. West’s statements. “Kanye is right about the Jews,” it read.

After photos of the incident circulated on social media, a chorus of celebrities condemned anti-Semitism in online posts, including Kim Kardashian, who filed for divorce from Mr. West in 2021.

“Hate speech is never OK or excusable,” she wrote on Twitter on Monday. “I stand together with the Jewish community and call on the terrible violence and hateful rhetoric towards them to come to an immediate end.”

Human-rights campaigners in recent days had publicly criticised Adidas over its partnership with Mr. West. On Tuesday, the Central Council of Jews in Germany called on the company to end its partnership with the artist.

“As a German company, I simply expect from Adidas a clear stance when it comes to anti-Semitism,” the organisation’s president, Dr. Josef Schuster, said on Twitter. “Entrepreneurial interests must not be the priority.”

Addressing Adidas, Jonathan Greenblatt, chief executive of the Anti-Defamation League, tweeted on Monday that “your silence is a danger to Jews.”

Adidas on Tuesday said it “does not tolerate anti-Semitism and any other sort of hate speech.”

Mr. West’s ventures in sneakers date to at least 2006 when he first collaborated with Adidas on a shoe that was never released. A year later the rapper started working with Nike Inc. and eventually released the coveted Nike Air Yeezy II, which included the famed Red Octobers. The Nike partnership ended in 2013.

Items that the artist designed in collaboration with Adidas made their debut in 2015, and the parties entered a long-term partnership the following year.

In the arrangement, Mr. West lends the Yeezy brand to the company in return for royalties of about 15% of the sales of Yeezy products. Adidas designs and manufactures the products, and it owns the designs, according to people familiar with the deal.

The partnership has been a boon for Adidas. The tie-up accounts for as much as 8% of Adidas’s total sales, analysts at UBS said in a report last week.

Without the partnership, the company’s annual sales have grown just 1% on average since 2017 compared with the actual sales growth of 3%, UBS estimated. Adidas has said that its partnership with Yeezy was one of the most successful collaborations in the industry.

But in recent months, Mr. West has criticised Adidas, as well as Gap, on social media. Gap decided to end its relationship with Mr. West last month, saying the company and Mr. West are “not aligned” in how they work together, The Wall Street Journal has reported.

Earlier this month, Adidas said it made repeated attempts to privately resolve disputes with Mr. West.

The breakup with Mr. West piles further pressure on the sporting goods maker, days after it cut its full-year guidance, citing a weaker business environment in China as well as a significant inventory buildup as a result of lower consumer demand in major Western markets. Other factors, such as suspended operations in Russia and the supply-chain problems that have engulfed global business, have contributed to the company’s lacklustre performance lately.

The company said on Thursday that it now expects currency-neutral revenue to grow by a mid-single-digit percentage rate in 2022, down from a mid- to high-single-digit percentage forecast previously.

Corrections & Amplifications
The musician and fashion-brand owner is Kanye West. An earlier version of this article incorrectly called him Kayne West in one instance. (Corrected on Oct. 25)


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A new trading year kicked off just weeks ago. Already it bears little resemblance to the carnage of 2022.

After languishing throughout last year, growth stocks have zoomed higher. Tesla Inc. and Nvidia Corp., for example, have jumped more than 30%. The outlook for bonds is brightening after a historic rout. Even bitcoin has rallied, despite ongoing effects from the collapse of the crypto exchange FTX.

The rebound has been driven by renewed optimism about the global economic outlook. Investors have embraced signs that inflation has peaked in the U.S. and abroad. Many are hoping that next week the Federal Reserve will slow its pace of interest-rate increases yet again. China’s lifting of Covid-19 restrictions pleasantly surprised many traders who have welcomed the move as a sign that more growth is ahead.

Still, risks loom large. Many investors aren’t convinced that the rebound is sustainable. Some are worried about stretched stock valuations, or whether corporate earnings will face more pain down the road. Others are fretting that markets aren’t fully pricing in the possibility of a recession, or what might happen if the Fed continues to fight inflation longer than currently anticipated.

We asked five investors to share how they are positioning for that uncertainty and where they think markets could be headed next. Here is what they said:

‘Animal spirits’ could return

Cliff Asness, founder of AQR Capital Management, acknowledges that he wasn’t expecting the run in speculative stocks and digital currencies that has swept markets to kick off 2023.

Bitcoin prices have jumped around 40%. Some of the stocks that are the most heavily bet against on Wall Street are sitting on double-digit gains. Carvana Co. has soared nearly 64%, while MicroStrategy Inc. has surged more than 80%. Cathie Wood‘s ARK Innovation ETF has gained about 29%.

If the past few years have taught Mr. Asness anything, it is to be prepared for such run-ups to last much longer than expected. His lesson from the euphoria regarding risky trades in 2020 and 2021? Don’t count out the chance that the frenzy will return again, he said.

“It could be that there are still these crazy animal spirits out there,” Mr. Asness said.

Still, he said that hasn’t changed his conviction that cheaper stocks in the market, known as value stocks, are bound to keep soaring past their peers. There might be short spurts of outperformance for more-expensive slices of the market, as seen in January. But over the long term, he is sticking to his bet that value stocks will beat growth stocks. He is expecting a volatile, but profitable, stretch for the trade.

“I love the value trade,” Mr. Asness said. “We sing about it to our clients.”

—Gunjan Banerji

Keeping dollar’s moves in focus

For Richard Benson, co-chief investment officer of Millennium Global Investments Ltd., no single trade was more important last year than the blistering rise of the U.S. dollar.

Once a relatively placid area of markets following the 2008 financial crisis, currencies have found renewed focus from Wall Street and Main Street. Last year the dollar’s unrelenting rise dented multinational companies’ profits, exacerbated inflation for countries that import American goods and repeatedly surprised some traders who believed the greenback couldn’t keep rallying so fast.

The factors that spurred the dollar’s rise are now contributing to its fall. Ebbing inflation and expectations of slower interest-rate increases from the Fed have sent the dollar down 1.7% this year, as measured by the WSJ Dollar Index.

Mr. Benson is betting more pain for the dollar is ahead and sees the greenback weakening between 3% and 5% over the next three to six months.

“When the biggest central bank in the world is on the move, look at everything through their lens and don’t get distracted,” said Mr. Benson of the London-based currency fund manager, regarding the Fed.

This year Mr. Benson expects the dollar’s fall to ripple similarly far and wide across global economies and markets.

“I don’t see many people complaining about a weaker dollar” over the next few months, he said. “If the dollar is falling, that economic setup should also mean that tech stocks should do quite well.”

Mr. Benson said he expects the dollar’s fall to brighten the outlook for some emerging- market assets, and he is betting on China’s offshore yuan as the country’s economy reopens. He sees the euro strengthening versus the dollar if the eurozone’s economy continues to fare better than expected.

—Caitlin McCabe

Stocks still appear overvalued

Even after the S&P 500 fell 15% from its record high reached in January 2022, U.S. stocks still look expensive, said Rupal Bhansali, chief investment officer of Ariel Investments, who oversees $6.7 billion in assets.

Of course, the market doesn’t appear as frothy as it did for much of 2020 and 2021, but she said she expects a steeper correction in prices ahead.

The broad stock-market gauge recently traded at 17.9 times its projected earnings over the next 12 months, according to FactSet. That is below the high of around 24 hit in late 2020, but above the historical average over the past 20 years of 15.7, FactSet data show.

“The old habit was buy the dip,” Ms. Bhansali said. “The new habit should be sell the rip.”

One reason Ms. Bhansali said the selloff might not be over yet? The market is still underestimating the Fed.

Investors repeatedly mispriced how fast the Fed would move in 2022, wrongly expecting the central bank to ease up on its rate increases. They were caught off guard by Fed Chair Jerome Powell‘s aggressive messages on interest rates. It stoked steep selloffs in the stock market, leading to the most turbulent year since the 2008 financial crisis. Now investors are making the same mistake again, Ms. Bhansali said.

Current stock valuations don’t reflect the big shift coming in central-bank policy, which she thinks will have to be more aggressive than many expect. Though broader measures of inflation have been falling, some slices, such as services inflation, have proved stickier. Ms. Bhansali is positioning for such areas as healthcare, which she thinks would be more insulated from a recession than the rest of the market, to outperform.

“The Fed is determined to win the war since they lost the battle,” Ms. Bhansali said.

—Gunjan Banerji

A better year for bonds seen

Gone are the days when tumbling bond yields left investors with few alternatives to stocks. Finally, bonds are back, according to Niall O’Sullivan of Neuberger Berman, an investment manager overseeing about $427 billion in client assets at the end of 2022.

After a turbulent year for the fixed-income market in 2022, bonds have kicked off the new year on a more promising note. The Bloomberg U.S. Aggregate Bond Index—composed largely of U.S. Treasurys, highly rated corporate bonds and mortgage-backed securities—climbed 3% so far this year on a total return basis through Thursday’s close. That is the index’s best start to a year since it began in 1989, according to Dow Jones Market Data.

Mr. O’Sullivan, the chief investment officer of multi asset strategies for Europe, the Middle East and Africa at Neuberger Berman, said the single biggest conversation he is currently having with clients is how to increase fixed-income exposure.

“Strategically, the facts have changed. When you look at fixed income as an asset class…they’re now all providing yield, and possibly even more importantly, actual cash coupons of a meaningful size,” he said. “That is a very different world to the one we’ve been in for quite a long time.”

Mr. O’Sullivan said it is important to reconsider how much of an advantage stocks now hold over bonds, given what he believes are looming risks for the stock market. He predicts that inflation will be harder to wrangle than investors currently anticipate and that the Fed will hold its peak interest rate steady for longer than is currently expected. Even more worrying, he said, it will be harder for companies to continue passing on price increases to consumers, which means earnings could see bigger hits in the future.

“That is why we are wary on the equity side,” he said.

Among the products that Mr. O’Sullivan said he favours in the fixed-income space are higher-quality and shorter-term bonds. Still, he added, it is important for investors to find portfolio diversity outside bonds this year. For that, he said he views commodities as attractive, specifically metals such as copper, which could continue to benefit from China’s reopening.

—Caitlin McCabe


Find the fear, and find the value

Ramona Persaud, a portfolio manager at Fidelity Investments, said she can still identify bargains in a pricey market by looking in less-sanguine places. Find the fear, and find the value, she said.

“When fear really rises, you can buy some very well-run businesses,” she said.

Take Taiwan’s semiconductor companies. Concern over global trade and tensions with China have weighed on the shares of chip makers based on the island. But those fears have led many investors to overlook the competitive advantages those companies hold over rivals, she said.

“That is a good setup,” said Ms. Persaud, who considers herself a conservative value investor and manages more than $20 billion across several U.S. and Canadian funds.

The S&P 500 is trading above fair value, she said, which means “there just isn’t widespread opportunity,” and investors might be underestimating some of the risks that lie in waiting.

“That tells me the market is optimistic,” said Ms. Persaud. “That would be OK if the risks were not exogenous.”

Those challenges, whether rising interest rates and Fed policy or Russia’s war in Ukraine and concern over energy-security concerns in Europe, are complicated, and in many cases, interrelated.

It isn’t all bad news, she said. China ended its zero-Covid restrictions. A milder winter in Europe has blunted the effects of the war in Ukraine on energy prices and helped the continent sidestep recession, and inflation is slowing.

“These are reasons the market is so happy,” she said.

—Justin Baer

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