The musician formerly known as Kanye West and Adidas parted ways about seven months ago, but crates of his well-known Yeezy sneakers are still stacked high in warehouses.
The German sportswear brand is struggling to turn its fortunes around after losing the profitable shoe line and dealing with the ongoing fallout from its previous connections to Ye while worrying about the destiny of 1.2 billion euros ($1.3 billion) worth of unsold Yeezy stock.
After reporting 400 million euros ($441 million) in lost sales at the beginning of the year, Adidas’ new CEO Bjorn Gulden stated in a conference call Friday that the company is “getting closer and closer to making a decision” and that the “options are narrowing.”
However, he said that “so many interested parties” were taking part in the negotiations that no decision had been made.
After cutting ties with Ye in October for his antisemitic and unpleasant remarks on social media and in interviews, Adidas is stuck with stacks of its trademark Yeezy sneakers.
After Ye and Ye parted, Gulden took over as CEO. He declined to clarify whether or not destroying the shoes had been ruled out but said the company was “trying to avoid that.”
Other solutions, he has previously stated, have disadvantages: selling the sneakers would entail paying royalties to Ye; restitching them to remove the brand identification would be dishonest; and distributing them to those in need might result in resale due to their high market value.
Gulden refused to divulge how many pairs of Yeezy sneakers Adidas is forced to hold on to, citing that demand could change if consumers knew how many they had.
Losing the Yeezy brand is “of course hurting us,” Gulden stated in a statement. According to the Herzogenaurach-based business, if Adidas chooses not to sell the remaining Yeezy stock, the breakup will lower profits this year by 500 million euros.
According to the corporation, the Yeezy line would have resulted in a 9% increase in net sales, which were down 1% in the first quarter to 5.27 billion euros.
In comparison to the same period last year, when it declared a profit of 310 million euros, it posted a net loss of 24 million euros.
Operating profit decreased from 437 million euros to 60 million euros, which excludes key factors like taxes.
As the business looks to relaunch growth and move past the breakup with Ye, Gulden claimed that the Adidas results were “a little better than we had expected.” 2023, according to him, is “a year of transition” leading up to “a better ’24 and a good ’25.”
The business also has issues related to the rapper. Adidas was sued last week in the US by investors who said the firm was aware of Ye’s hateful words and destructive behavior for years before the breakup but did nothing to prevent financial damages.
The action, on behalf of investors who purchased Adidas securities between May 3, 2018, and February 21, 2023, cited Ye’s comments from 2018 in which he implied that slavery was a “choice” and claimed that Ye made antisemitic remarks in front of Adidas employees.
Last week, the business issued a statement rejecting “these unfounded claims” and stating it will “take all necessary steps to defend ourselves against them vigorously.”
Adidas lost 600 million euros in sales in the final three months of 2022 due to terminating the Ye agreement, contributing to the company’s 513 million euro net loss.
According to Adidas, an operating loss of 700 million euros is probable this year, mainly due to the 500 million euro damage resulting from not selling the company’s current stock of Yeezy sneakers.
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