April 2, 2023

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Adidas losses mount after abandoning Yeezy partnership

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Adidas warned Wednesday that it could post its first annual loss in more than three decades amid the ongoing fallout over its defunct collaboration with Kanye West, a rip-off that largely led to a $763 million loss in the fourth quarter.

CEO Bjørn Gulden said 2023 will be a “transitional year” as the German sportswear giant seeks to offload its inventory of Yeezy — the highly profitable fashion label created with the rapper, which now goes to Ye — and reorient it back into its core business. He said the company could then start building a profitable business again in 2024.

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

The company ended its relationship with the artist in late October after a series of disagreements began with him appearing in a “White Lives Matter” T-shirt at the 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 segment of an interview with Fox News host Tucker Carlson.

Adidas owns $500 million worth of Kanye West sneakers and there are no good options

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

At that point, I was faced with a dilemma: What to do with the nearly $500 million worth of Yeezy shoes. Adidas said in February it could lose 1.2 billion euros ($1.3 billion) in revenue this year if it could not repurpose merchandise. Industry experts said Adidas can sell, liquidate, donate or destroy rebranded shoes — but each option comes with its drawbacks.

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Golden said Wednesday that Adidas has ruled out burning, giving away or rebranding the sneakers, according to what he reported. Bloomberg News. But he said the company was open to selling it and donating the profit to charity.

“There are a lot of people who have an interest in this from different communities all over the world,” he said. “I’ve only been 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 a demand for the product. The CEO of Impossible Kicks, a large online vending company, told CNN last week that she saw a dossier 30 percent increase in Yeezy sales Since we parted company with Adidas and Yi last fall.

The company faces an expected loss in 2023 of €700m if it decides “irrevocably” not to sell any of its Yeezy stock. But analysts say it faces other problems, including declining 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 been underperforming, WSJ reports mentioned. So far, Adidas has failed to find the “next big thing,” Wedbush analyst Tom Nikic told The Washington Post in February after the company announced potential Yeezy losses.

Adidas, he said, “is in a competitive industry and they haven’t had an A game in several years.” “So he makes it difficult.”