👟 Kanye’s fashion fallout

Yeezy out… After 19 days and a storm of backlash, Adidas has cut ties with Kanye West, ending his billionaire status. The rapper and Yeezy founder has faced public criticism (even from his ex Kim K) after making antisemitic comments, among other offensive statements. Over the weekend in LA, West’s outbursts emboldened neo-Nazi activists to stage anti-Jewish protests. Now Adidas is ending production of Yeezy products and stopping all payments to Ye.

• Going back: Since launching in 2013, Adidas’ Yeezy partnership has raked in $2B in annual sales (about 10% of Adidas’ revenue).
• Going forward: This year alone Adidas expects to lose $246M — and next year could lose $400M.

Ye’s corporate catastrophe… As West’s reputation grows increasingly unstable, other partners are cutting ties too. This month, luxe fashion house Balenciaga ended its collab with West, and talent agency CAA also dropped him. Last month, West's lawyers sent a letter to Gap with plans to terminate his 10-year deal (which had been on track to become a billion-dollar brand). It’s not the first time businesses have been burned by celeb ties:

• In 2009, Tiger Woods lost $50M in sponsorship deals after his extramarital-affairs scandal.
• Last year, mega beauty influencer James Charles reportedly lost millions in sales after cosmetics brand Morphe dropped him over sexual-misconduct allegations.

Earnings call in the metaverse… Not quite there yet. All eyes are on Meta, which reports today after the bell. In its June quarter, Zuck’s dorm-room baby had its first-ever drop in revenue since going public as ad sales sagged. While users ticked up, profit tanked 36%. Expectations are low today:

• Sales slump: Analysts expect Meta’s quarterly revenue to come in around $27.5B, which would represent a 5% drop from last year.
• Profit hit: As Meta splurges billions on its meta-ambitions, analysts expect a 42% profit plunge, on average.
• Since expectations are so low and wide ranging, an earnings surprise could boost Meta stock, which this year is down 60% (the S&P 500 is down “only” 20%).

Does the metaverse have legs?... Meta’s avatars still don’t. Meta’s motion-capture leg teaser may be the perfect metaphor for its current conundrum. After spending $15B+ on its meta-revamp, Meta’s struggling to attract users (and even its own employees) to its flagship Horizon Worlds. A few barriers:

• Empty worlds: Horizon Worlds users have been declining since spring, and it now has fewer than 200K, according to documents seen by The Wall Street Journal. Most visitors don’t return after the first month, and most “worlds” are never visited.
• Empty wallets: Horizon Worlds is accessible only through Meta’s pricey Quest VR headsets. Its $1.5K headset may not be the most #relatable Hanukkah gift, but Meta says it plans to expand Worlds to web and mobile.

• Query: Google’s not feeling lucky: the search giant’s quarterly sales growth slowed to 6% from 41% last year as ad spending sagged and YouTube faced fierce competition from TikTok. Profits also disappointed.
• Pickup: Call it cruise control: GM crushed Wall Street’s quarterly profit predictions and fell just shy on sales. But it stuck to its original forecast because of “headwinds” like inflation.
• Grow: Canadian cannabis colossus Canopy Growth is launching Canopy USA to speed up its US debut. The American cannabis market’s expected to hit $50B by 2026, even though the green stuff still isn’t federally legal.
• Fizz: Soda sales are anything but flat: Coke raised its full-year outlook after reporting a surprisingly bubbly sales bump. To address inflation’s squeeze, Coke’s hiking some prices and lowering others.
• Soft: Microsoft’s forecast = partly cloudy. The software juggernaut narrowly beat sales and profit expectations, but key cloud revenue was lower than expected while guidance disappointed.

• Earnings expected from Meta, Bristol-Myers Squibb, Boeing, Ford, Kraft Heinz Co.

Authors of this Snacks own: shares of Canopy Growth, Google, GM, Microsoft, and Ford

ID: 2557037