Adidas made 400 million euros ($437 million) from the initial sale of the Yeezy sneakers that were left over after the German sportswear manufacturer severed ties with Ye, the rapper formerly known as Kanye West.
Adidas is trying to sell the unsold shoes and donate a portion of the proceeds to organizations that fight antisemitism and other forms of hate.
Adidas reported Thursday that the company’s second quarter operating profit was stronger than expected at 176 million euros, thanks in large part to the initial batch of sneakers that were released in June and quickly sold out.
On Wednesday, a second sale commenced. Adidas claimed it had looked for a means to get rid of 1.2 billion after Ye’s antisemitic and other offensive remarks prompted the brand to cancel its collaboration with the rapper in October.
CEO Bjrn Gulden, who assumed control in January, stated, “We will continue to cautiously sell off more of the existing Yeezy inventory.”
This enables us to donate a significant amount to organizations like the Anti-Defamation League, the Philonise & Keeta Floyd Institute for Social Change, and Robert Kraft’s Foundation to Combat Antisemitism, which is considerably better than destroying and writing off the inventory, according to Gulden.
Adidas has already donated 10 million euros to the organizations and plans to donate another 100 million, with extra donations conceivable based on how future sales go, according to chief financial officer Harm Ohlmeyer.
Jewish community leaders who were contacted by The Associated Press said they had no plans to purchase their own pair of Yeezys but were generally in favor of the idea.
The Yeezy sales are, according to the CEO of Adidas, “of course also helping both our cash flow and general financial strength.”
Around 20% to 25% of the Yeezy sneakers that were stockpiled in warehouses were sold during the first sale, accounting for 150 million euros of Adidas’ 176 million euros in operating profits for the April to June quarter.
Ohlmeyer, however, issued a warning, noting that the Yeezy contribution was less than the figure suggested because it left out a significant portion of the company’s expenses.
Adidas also cautioned that while the first sale featured the priciest sneakers and sold out completely, it was uncertain whether the prices and demand for the subsequent releases would be comparable.
Adidas was in a dangerous position when the Ye deal went south due to the success of the Yeezy brand, and pressure to cut ties increased last year as other businesses distanced themselves from the musician.
The torn-up contract was currently undergoing arbitration, “a process that is being taken care of by legal people” for both parties, and was surrounded “by a lot of uncertainty,” according to Gulden, the Adidas CEO.
When asked if Ye should receive royalties on the shoes, the corporation merely stated that it would uphold its end of the bargain.
According to Adidas, Yeezy sales in June were “largely in line” with those in the second quarter of 2017.
The increase has helped the business lower its forecast for this year’s operational deficit from 700 million euros to 450 million euros.
Adidas stated that the gifts to anti-hate organizations were not a predetermined proportion of sales but rather that it had discussed the right amount with the beneficiaries.
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