Adidas doesn’t know what to do with $1.9 billion worth of Yeezy sneakers after cutting ties with rapper Ye

The company is looking to expand its soccer, running, outdoor and golf lines, and expects to see more collaborations with social media influencers and pop culture stars like Beyoncé and Pharrell Williams this year. is part of the company’s lifestyle division, and has been key to the popularity of adidas with a wider audience in recent years, especially in the United States.

But the demise of the most prominent of these collaborations hung on the recent earnings release. Last fall, Ye began making anti-Semitic remarks on his Twitter, quickly sparking criticism when the company cut ties with him.

Adidas, which was criticized for not acting quickly, described his comments and actions as “unacceptable, hateful, dangerous and a violation of the company’s values ​​of diversity and inclusion, mutual respect and fairness. I am doing,” he said.

Terminating the deal with Ye would leave the company with a ton of sneakers and clothing that could cost it €1.2 billion in sales and about €500 million in profits this year.

Gulden said that when the contract was cut, Adidas decided to continue producing Yeezy merchandise in its pipeline to prevent the thousands of people involved from losing their jobs. Now questionable.

“If we sell it, we promise that the people hurt by this will also get something good out of it.

Yeezy products hit the streets like nothing happened.

Charlotte Knobloch, President, Jewish Community Munich and Upper Bavaria

He didn’t elaborate, but added that donating the proceeds would make more sense than simply giving away shoes of exceptional value in the resale market among collectors and other fans. Before the scare, Yeezy sneakers often sold for hundreds of dollars a pair.

Jewish groups were among the loudest to call on Adidas and other companies to cut ties with Ye during this period of rising anti-Semitism.

Their reaction to the idea of ​​selling Yeezy shares for legitimate purposes was divided. said a financial investment from Adidas could be a “good start”, but she called on the company to make a more comprehensive effort.

Loading

But Charlotte Knoblauch, a representative of the Jewish community in Munich and Upper Bavaria, warned that bringing Yeezy shoes back to the market would send the wrong signal, regardless of what happened to the bottom line.

“By deciding to sell West’s merchandise now, Adidas chooses to turn back the clock and significantly undermine its unique value regardless of where the revenue goes. You will end up on the street as if it never happened.

Analysts have highlighted various competing factors involved in deciding on the Yeezy stock.

“If you have non-monetary issues, it complicates the decision to donate, liquidate or just move on,” said Simeon Siegel, retail analyst at BMO Capital Markets.

The company previously said it would be the “sole owner of all design rights to existing products” under the partnership, but Gulden said it would not consider rebranding Yeezy inventory. He said Adidas wouldn’t make a profit if it was sold undestroyed, but Ye was entitled to a portion of the proceeds as stipulated in the royalty agreement.

“Losing the Yeezy business is very painful,” Galden told reporters, praising the creativity of collaboration on multiple levels, including design, marketing, and use of social media and apps.

“There is no other Yeezy business on the market,” he said. “Those who think they can replace this with another, they can’t.”

The financial results briefing on March 8 was the first announcement at Adidas. He comes after his more than 12 years as chairman at crosstown rival Puma. Both companies are based in the same town of Herzogenaurach, Bavaria and were founded by the Dassler brothers Rudolf and Adi after World War II.

Adidas reported a 6% increase in net sales to €22.5 billion in 2022, while operating profit fell 66% to €669 million. This was weighed down by the withdrawal from Russia and the ‘COVID-zero’ lockdown in China. To more unsold inventory.

The loss forced the company to issue earnings warnings four times in six months, and both Moody’s and S&P downgraded its debt last month.

Adidas for 2023 is projecting underlying operating profit at near break-even levels, given the loss of sales if it doesn’t find a way to sell its Yeezy inventory.

Adidas faces many challenges beyond its split with Ye. The company has lost market share to Nike and other rivals, including Gulden’s former employer Puma.

Adidas said it plans to cut its dividend as part of a cost-cutting measure, pending shareholder approval at its annual shareholder meeting in May.

This article was originally new york times.

Get the most out of our health, relationships, fitness and nutrition Live Well Newsletter. Receive in your inbox every Monday.