Adidas figures out what to do with all of its Yeezy shoes after breaking up with Ye

FRANKFURT, Germany (AP) – Adidas still can’t decide how to dispose of the €1.2 billion ($1.3 billion) Yeezy shoes after splitting with the rapper formerly known as Kanye West, which sent the German sportswear maker into a big loss late last year and expectations more pain ahead.

CEO Bjorn Gulden said the sale of the popular shoe line would mean paying royalties to Ye, who was fired by Adidas five months ago following anti-Semitic remarks on social media and in interviews. During an earnings call on Wednesday, he pointed to the “many variables” of what to do with the shoes now in storage.

Destroying them could “cause sustainability issues,” though some companies have offered recycling solutions, said Gulden, who was appointed CEO after the explosion over Ye’s remarks. He added that altering them to hide the Yeezy branding so they can be sold is “not very fair, so it’s not an option.”

Offers to distribute them to those in need in places like earthquake-hit Syria or Turkey would mean the product “will be back very quickly” due to its high market value, “so it’s not an option,” Gulden said.

If Adidas does decide to sell the shoes, “I can promise you that the people who have been affected by this will also get something good out of it and receive donations and proceeds in various forms, shapes or forms,” the CEO said.

Adidas parted ways with Ye in October after other brands faced pressure to cut ties with the rapper over his anti-Semitic and other offensive remarks. The company is currently struggling to find ways to become profitable again and replace its famous Yeezy line, which analysts say accounted for up to 15% of its bottom line.

The breakup of Ye cost €600 million in lost sales in the last three months of 2022, resulting in a net loss of €513 million for the company. The decline, also linked to higher supply costs and falling revenue in China, contrasts with a profit of €213 million in the fourth quarter of 2021.

More losses could be ahead as the company forecasts a €500 million profit loss this year if it decides not to repurpose the remaining Yeezy products in stock. The company forecasts an operating loss in 2023 of 700 million euros.

Gulden said “so many companies” were willing to buy the popular shoes, but that would mean paying royalties to E. However, rumors that the company was in talks to sell them “are not true.”

He heard from “billions of people who have opinions on this, and of course when you sit inside, it looks a little different than outside.”

Gulden also said that Adidas is still investigating former employees’ allegations that Ye created a toxic work environment and that the sportswear company was aware of his problematic behavior and failed to protect workers.

The CEO called 2023 a “transitional year”, saying “we can start building a profitable business again in 2024.”

Last year, net sales in the fourth quarter rose by just 1.3% to 5.21 billion euros compared to the same quarter last year. The company cited a 50% drop in revenue in China and higher shipping and delivery costs that cannot be offset by higher prices.

For the full year, the Herzogenaurach, Germany-based company said it made a net profit of 638 million euros on sales, which rose 6% to 22.5 billion euros.

Adidas also further solidified its lead by replacing top sales and marketing executives. Head of Global Sales Roland Auschel will leave the company after 33 years and will be replaced by Arthur Hoeld, currently Head of Europe, Middle East and Africa.

Brian Grevy, head of global brands, will step down on March 31st. CEO Gulden will take over his product and marketing responsibilities.