Adidas doesn’t know what to do with $1.3 billion worth of Yeezy sneakers

The new CEO of Adidas has $1.3 billion in Yeezy sneakers he doesn’t know what to make of.

Stored in warehouses all over All over the world, sneakers recall the once fruitful bond between Adidas and Kanye West, the rapper now known as Ye.

Since the first Yeezy Boost 750 shoe released in February 2015, its Yeezy brand has become a defining force in the activewear industry and a cornerstone. incredibly profitable for Adidas.

That ended when a fierce backlash against a series of anti-Semitic comments by the musician forced Adidas to pull out of the deal in October.

Now Bjorn Gulden, who took over Adidas in January, is trying to stabilize the German company and the sudden loss of a profitable line it’s just one of its problems.

Last year, sales in China, its largest marketfell by more than 35%. when the country extended its lockdown to curb covid, and the decision to withdraw from Russia after it invaded Ukraine cost it an estimated $62 million. He’s also losing market share to Nike and other rivals.

Wednesday, Fiorino declared 2023 as a “year of transition“, outlining plans to shift priorities towards traditional product lines and reduce costs, starting with the reduction of the dividend to €0.70 per share from the current €3.30.

At the same time, he said, the company was at a standstill trying to decide what to do with his remaining stock of Yeezy sneakers and other sports clothing.

Gulden said he and his team were still weighing their options, including potentially selling the inventory and donating the proceeds “to do some good.” He said the shoes were most likely not destroyed.

Crash loomed on Wednesday’s earnings presentation. last fall, You started making anti-Semitic comments on Twitter which resulted in immediate pushback when companies opted out of it.

Adidas, which has been criticized for not acting quickly enough, described its comments and behavior as “unacceptable, hateful and dangerous and violate the company’s values ​​of diversity and inclusion, mutual respect and fairness”.

Break the deal with Ye left the company a mountain of shoes and clothesresulting in potential losses of €1.2 billion in sales and around €500 million in profits this year.

When the contract was terminated, Gulden said, Adidas decided to continue production of Yeezy products in the pipeline forto prevent thousands of people involved from losing their jobs. The future of that inventory is now in doubt.

“If we sell it, I promise the people who have been hurt by this will also get some good out of it,” Gulden said. He didn’t provide further details, but added that donating the proceeds would make more sense than simply giving away the shoes, which are insanely valuable on the resale market to collectors and other fans.

Before last year’s hustle and bustle, Yeezy sneaker often they sold for hundreds of dollars a pair.

“Losing the Yeezy business is very difficult.he said Wednesday, praising the creativity of collaborating on multiple levels, including design, marketing, and using social media and apps.

“There are no other Yeezy businesses on the marketHe added. “People who think you can replace this with something else, you can’t.”

By 2023, Adidas predict an operating profit underlying it at roughly a breakeven level accounting for lost sales, in case it doesn’t find a way to sell Yeezy inventory.

Adidas takes on a lot of them other challenges besides her breakup with Ye. The company lost market share to Nike and other rivals, including Gulden’s previous employer Puma.

Adidas said it would cut its dividend as part of cost-saving measures, pending shareholder approval at its annual meeting in May.

Source: New York Times