adidas’ Financial Status Still Taking a Hit From Ended Yeezy Partnership
News on this topic was first published March 9, 2023.
Update May 8, 2023: adidas have published their Q1 financial results for 2023. They’ve disclosed that the decision to cut ties with Yeezy is still having undesirable effects on the business. In March, adidas made it clear that they were unsure what to do with the remaining Yeezy product, and in their they’ve confirmed they are still reviewing options for repurposing the Yeezy inventory. It’s noted that if they decide to write off the product, it’ll cost their operating profit a total of 500 million euros.
adidas CEO Bjørn Gulden also notes that the discontinuation of the Yeezy category has represented a loss of around 400 million euros this quarter. Gulden stated, ‘The decline in Lifestyle and the loss of Yeezy are of course hurting us.’
Last month circulated suggesting that and would be reuniting to sort out the remaining product. However, in adidas’ latest earnings call, there was no mention that partnering with Ye was even an option. It was mentioned that adidas are projecting a $738 million operating loss for 2023 – its first negative income in 31 years. If the Yeezy stock were to remain unsold, it would account for $500 million of that, as reported by
The crux of adidas’ earnings call revealed that CEO Bjørn Gulden is still grappling with how the Yeezy inventory needs to be handled, whether that’s selling it, giving it away or destroying it. Gulden said, ‘Selling the product normally… causes a lot of reputational risk. The other side is we burn it or do whatever it takes to destroy it, and it disappears, then you have another issue,’ referring to sustainability.
‘We could sell [the sneakers] with a small margin and give the margin away for different donations. We can sell them with more margin and give more donations. I think the goal that we have is to do what the probability is that it damages us the least and we do something good.’
What’s clear is that there’s no definitive decision being made in the coming weeks on what adidas will choose to do with the Yeezys, but retail and luxury analyst at Deutsche Bank Research, Adam Cochrane, says the best solution is to sell.
Cochrane said, ‘Selling remaining stock can make the best out of the situation by recovering some of the lost profit and costs. I think to sell it themselves and to split the proceeds with the charity will be the most likely outcome.’
What’s more, Gulden mentioned he had received over 500 offers to buy the rights to the remaining Yeezy stock. But going down this avenue ‘would not necessarily be the right thing to do.’