Since its breakup with Kanye West, Adidas has struggled to dispose of 1.2 billion euros ($1.3 billion) worth of Yeezy shoes, forcing it into a significant loss at the end of last year.
Bjorn Gulden, Adidas’ CEO, said selling the popular shoe line would mean paying Ye royalties. Ye was dropped five months ago after making antisemitic comments on social media and in interviews. As he pointed out on an earnings call on Wednesday, there are “many variables” regarding what to do with the shoes stacked in warehouses.
In spite of the blowup over Ye’s remarks, some companies have offered recycling solutions, so destroying them might raise sustainability concerns. In his opinion, restitching them to hide the Yeezy brand in order to sell them is not an option because it isn’t very honest.
Because of their high market value, giving them away to earthquake-hit Syria or Turkey would only make the product return very quickly, “so that’s not really an option,” Gulden said.
In the event Adidas decides to sell the shoes, “I can assure you that the people who have been hurt by this will get something good out of it as well – donations and proceeds in various ways,” the CEO said.
As a result of Ye’s antisemitic remarks and other offensive remarks, Adidas broke ties with him in October. Analysts have estimated that the adidas banner Yeezy line accounted for as much as 15% of its net income, so it is now struggling to find a way to become profitable again and replace it.
In the last three months of 2022, Ye lost 600 million euros in sales as a result of the breakup, resulting in a net loss of 513 million euros for the company. The decline, also attributed to higher supply costs and slumping revenue in China, contrasts with a profit of 213 million euros in the fourth quarter of 2021.
If the company Adidas does not repurpose the remaining Yeezy products in stock, it could lose 500 million euros this year. It estimates an operating loss of 700 million euros in 2023.
Gulden said “so many companies” were looking to buy the shoes, but they would have to pay royalties to Ye. Rumors that the company was in talks to sell them, however, “are not true.”
“Lots of people have opinions about this, and from the inside, it looks a little different than from the outside.”
Furthermore, Gulden said Adidas is still investigating former employees’ allegations that Ye created a toxic work environment and failed to protect workers from his problematic behavior.
“We can then start to build a profitable business again in 2024,” said the CEO.
Net sales increased by a mere 1.3% to 5.21 billion euros from the same period last year, due to a 50% drop in revenue in China and higher supply and shipping costs.
During the full year, the Herzogenaurach, Germany-based company made a net profit of 638 million euros on sales that rose 6%, to 22.5 billion euros.
In addition to replacing its top sales and marketing executives, Adidas also replaced its global sales head Roland Auschel. Arthur Hoeld is now the company’s head of Europe, Middle East, and Africa.
Grevy will step down on March 31, and CEO Gulden will take over product and marketing responsibilities.