As the fallout from the severed partnership between adidas and Ye, formerly known as Kanye West, continues, adidas has disclosed that it may face a significant financial decision regarding its unsold Yeezy merchandise. According to the Associated Press, the sportswear giant is contemplating writing off an estimated $320 million (300 million euros) worth of Yeezy shoes that remain in warehouses following its split with the artist after his controversial antisemitic statements.
Since ending its partnership with Ye, adidas has conducted two sale events to offload the remaining inventory. These sales totaled approximately $800 million (750 million euros), with some of the proceeds benefiting organizations committed to combating antisemitism, including the Anti-Defamation League and the Philonise & Keeta Floyd Institute for Social Change. Though it was reported that a “significant share” of the profits would be donated to these organizations, only $10.7 million (10 million euros) had been donated thus far. This would mean that only around 1% of the total sales were donated.
The company has indicated that these potential write-offs are a major component in its revised financial outlook for the current year, with projected losses being reduced to about $106 million (100 million euros) from an earlier forecast of $479 million (450 million euros). This adjustment has been attributed to the revenue generated from the prior Yeezy releases. Still, this would mark the first time in 31 years that the German sportswear giant would operate at a loss.
adidas' new CEO, Bjørn Gulden, has the unenviable task of steering the company through the aftermath of the Yeezy breakup. Gulden, who assumed his role post-separation, is focusing on recovery strategies for the brand, which has historically seen considerable profit from the Yeezy collaborations. In Q2 of the 2023 fiscal year, the “Yeezy Day” sales accounted for 85% of adidas’ operating profit, and it was reported that 40% of adidas’ profit was attributed to Yeezy sneaker sales.
This development comes amidst increasing concerns over antisemitism and Islamophobia, exacerbated by the recent Israel-Hamas conflict. In response to the regional tensions, Gulden highlighted adidas’ commitment to humanitarian efforts, noting the company's initiative to start donation programs for the affected areas, including Gaza. It was also reported that this conflict may be the reason behind the cancelation of a planned Yeezy sales event in November.
During a conference call with reporters, Gulden clarified that while the complete write-off of the remaining Yeezy stock is a possible outcome, no final decision has been made. He emphasized that adidas is continuously assessing the situation. As to the fate of the unsold inventory, Gulden outlined that the stock is distributed across various locations, yet he refrained from detailing the company's course of action if the merchandise ultimately remains unsold.
Gulden also said, “We of course hope we can do more drops next year and we can get more value out of it and donate the proceeds, but right now financially we haven’t made a decision and that’s why the outlook is the way it is.”
The decision ahead for adidas is complex, entailing financial, ethical, and brand considerations. Once the remaining Yeezy inventory is dealt with, whether via a sales event or writing off the product, adidas has made it clear that using Yeezy designs “is not part of our strategy” in the future.
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