Global Courant 2023-05-05 16:47:31
Frankfurt, Germany — It’s been nearly seven months since Adidas parted ways with the rapper formerly known as Kanye West, and boxes of his popular Yeezy shoes are still piled up in warehouses.
The fate of 1.2 billion euros ($1.3 billion) in unsold Yeezy shares weighs on the German sportswear company as it attempts to turn around after the loss of the lucrative sneaker line and the lingering fallout from its former ties to Ye.
Adidas is getting “closer and closer to making a decision” about what to do with the sneakers and the “options are getting smaller,” new CEO Bjorn Gulden said in a conference call on Friday after reporting 400 million euros ($441 million) to lost sales at the start of the year.
But with “so many interested parties” involved in the talks, no decision had been made, he said.
Adidas is stuck with piles of shoes from its flagship Yeezy brand after it ended its relationship with Ye in October over his anti-Semitic and other offensive comments on social media and in interviews.
Gulden, who became CEO in January following Ye’s split, declined to say whether destroying the shoes was out of the question but that the company was “trying to avoid”.
He has previously said that other options have drawbacks: selling the sneakers would mean paying royalties to Ye, re-stitching to remove the brand identification would be unfair, and giving it away to those in need could lead to resale because of their high market value.
Gulden does not want to say how many pairs of Yeezy shoes Adidas is holding “because then the consumer would know how many we have and that could affect demand.”
The loss of the Yeezy brand “of course hurts us,” Gulden said in a statement. The breakup will cut profits by €500 million this year if Adidas decides not to sell the remaining Yeezy shares, the Herzogenaurach-based company said.
Net sales fell 1% to 5.27 billion euros in the first quarter and would have increased 9% with the Yeezy line, the company said. It reported a net loss of €24 million, down from a profit of €310 million in the same period a year ago.
The operating result, excluding some items such as taxes, fell from 437 million euros a year earlier to 60 million euros.
Gulden said the results for Adidas were “slightly better than we expected” as the company tries to resume growth and move beyond the breakup with Ye. He called 2023 “a year of transition” on the way to “a better ’24 and a good ’25”.
The company is facing other issues related to the rapper. Investors sued Adidas in the US a week ago, alleging the company knew about Ye’s offensive comments and damaging behavior years before the split and failed to take precautions to mitigate financial losses.
The lawsuit – representing people who bought Adidas securities between May 3, 2018 and February 21, 2023 – pointed to comments from 2018 in which Ye suggested slavery was a “choice” and reports of Ye making anti-Semitic statements in front of Adidas personnel .
The company said last week it “rejected these baseless claims and will take all necessary steps to vigorously defend against them.”
Ending the Ye partnership also cost Adidas €600 million in lost sales in the last three months of 2022, taking the company to a net loss of €513 million.
An operating loss of 700 million euros is possible this year, Adidas said, mainly because of the 500 million euros it would cost if it did not sell the existing Yeezy shoes.
