Nike likely to see biggest boost in the aftermath of Adidas cutting ties with Kanye West, footwear analyst says

• With the Adidas and Yeezy partnership terminated, other shoe brands could see a boost in sales, an expert says.
• "I think the most obvious beneficiary is Nike," Tom Nikic, senior vice president of equity research at Wedbush Securities, told Insider.

In the wake of Adidas dropping its partnership with Kanye West, an expert says competitors stand to gain an influx of business from sneakerheads looking to spend their disposable income elsewhere.

Tom Nikic, senior vice president of equity research at Wedbush Securities, told Insider that while he anticipates several competitors will get a boost, Nike is likely to benefit most from the dismantling of Adidas's Yeezy deal.

"I think the most obvious beneficiary is Nike," Nikic said. "If all of a sudden that customer who was buying a couple pairs of Yeezys every year now finds themselves with a few 100 extra dollars in their budget every year, the most likely direction they're going to go with that money is Nike: the Jordans and the Dunks."

On Tuesday, Adidas became the latest brand to drop West, now known as Ye, after a string of companies — including Gap, JPMorgan Chase, Balenciaga, Vogue, and Twitter — severed ties with the artist.

The dropped deals come in response to Ye's recent controversial behavior, including making antisemitic comments on Twitter and wearing a "White Lives Matter" shirt to his Yeezy fashion show.

"Adidas does not tolerate antisemitism and any other sort of hate speech," Adidas said in a statement. "Ye'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."

Yeezy shoes — which Nikic said catered to the most passionate sneakerheads — can range from $200 to $600, but are often resold for much higher. West said he lost $2 billion in just one day after Adidas, Balenciaga, and Gap dropped him, Insider reported.

Adidas said the termination of the partnership was expected to have a short-term negative impact of up to $246 million on the company's net income in 2022 "given the high seasonality of the fourth quarter."

"They either had to take the hit financially or they had to take the public relations hit," Nikic said. "They decided to take the financial hit, probably because they know the public relations hit would have had a bigger impact long term on the brand."

Beyond the immediate financial blow, Nikic said the loss of Yeezy will serve as a period of rebuilding for Adidas, as he believes the company has relied heavily on Yeezy and doesn't have similar products that could backfill that demand.

He added Adidas is still collaborating with artists like Beyonce and Bad Bunny, which he said the company could lean on as it pivots away from Yeezy.

"Product development and product innovation will be key," Nikic said. "They're going to have to develop the next big thing that sneakerheads and sneaker shoppers are going to go crazy for."

Nikic said other brands could see this as a cautionary tale, especially if they put "morals and ethics above dollars and cents." But at the end of the day, shoe brands are fashion brands and they want to drive the image that their products are cool and trendy, he added.

"My guess would be that brands will continue to work with artists and even semi-controversial artists as long as those controversies are something that they can feel comfortable with," Nikic said.