By Sam Boughedda
Bernstein analysts said in a note to clients on Tuesday that regardless of whether Yeezy comes or goes, Adidas AG's (ETR:ADSGN) current 2025 targets are out of reach.
The analysts explained that Yeezy and Adidas' 7-year partnership ended this year, and although Adidas owns the Adidas Yeezy IP, management does not plan to continue selling the brand.
"We expect the franchise to be completely terminated, including no resale of existing product and a resulting €500m writeoff — a clean slate with minimal risk to the Adidas brand," they wrote.
Bernstein calculates that the Yeezy business tripled in size from 2017 to 2022, from 500 million to a 1.7 billion run rate — 7% of Adidas brand sales.
However, even with Yeezy, Bernstein said Adidas wouldn't have been able to meet their 2025 targets.
"With Yeezy, would Adidas have been able to meet their 2025 targets? Not by a long-shot. Due to a mix of external factors (e.g. China lockdowns) and internal (e.g. basketball launch delays), the targets set in 2021 now seem wildly out of reach. Even with Yeezy, Adidas brand sales would have only grown at a 5.6% 4-yr CAGR (vs. 8-10% avg. target) and EBIT margin would have been 10.2% (vs. 12-14% target)," the analysts added.
As a result, they expect to see Adidas' medium-term targets reset this year.