Adidas losses mount after exiting Yeezy partnership


Adidas warned Wednesday that it could incur its first annual loss in more than three decades amid the ongoing fallout over its now-defunct collaboration with Kanye West, a breakup that largely drove its $763 million fourth-quarter loss.

CEO Bjørn Gulden said 2023 will be a “year of transition” as the German sportswear giant looks to offload its inventory of Yeezy – the highly profitable fashion brand created with the rapper, who now goes by Ye – and reorient back to its core business. The company can then start building a profitable business again in 2024, he said.

“Adidas has all the ingredients to succeed. But we need to put our focus back on our core: product, consumers, retail partners and athletes,” Gulden said in a statement

The company ended its relationship with the entertainer in late October after a series of controversies that began with him appearing in a “White Lives Matter” T-shirt at his Paris Fashion Week show. Days later, he made anti-Semitic comments on Instagram and Twitter, then doubled down on that rhetoric in a podcast and an unaired portion of an interview with Fox News host Tucker Carlson.

Adidas has $500 million worth of Kanye West sneakers and no good options

Celebrities, political leaders and Jewish organizations condemned the artist and called out Adidas, which was slower to respond than Yes’ other business partners. Balenciaga and JPMorgan Chase, among others, had cut ties with him weeks earlier.

At the time, it faced a dilemma: What to do with about $500 million worth of Yeezy shoes. Adidas said in February that it could lose 1.2 billion euros ($1.3 billion) in revenue this year if it could not recycle the item. Industry experts said Adidas could sell rebranded shoes, liquidate them, donate them or destroy them – but that each option has its drawbacks.

Gulden said Wednesday that Adidas has ruled out burning the sneakers, giving them away or rebranding them, according to Bloomberg News. But he said the company is open to selling them and donating the proceeds to charity.

“There are so many people who have an interest in this from different communities from all over the world,” he said. “I’ve only been involved in this for seven weeks and I don’t feel qualified to make a decision based on the facts I have.”

But there seems to be demand for the product. The CEO of Impossible Kicks, a major online retailer, told CNN last week that it has seen a 30 percent increase in Yeezy sales since Adidas and Ye parted ways last fall.

The company faces an expected loss of €700 million by 2023 if it “irrevocably” decides not to sell any of its Yeezy inventory. But it faces other problems, analysts say, including slowing demand in China and how the company will fill the revenue gap left by the Yeezy brand.

Beyoncé’s Ivy Park clothing brand partnership with Adidas has underperformed, the Wall Street Journal reported. And so far, Adidas has failed to find “the next big thing,” Tom Nikic, a Wedbush analyst, told The Washington Post in February after the company announced its potential Yeezy loss.

Adidas is “in a competitive industry and they haven’t exactly had their A-game for several years now,” he said. “So that makes it difficult.”

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