Yeezy shoes are still stuck in limbo after Adidas parted ways with Ye

Adidas, the German sportswear company, has reported a decline in operating profits during the first quarter of 2023 due to its break with rapper Ye, formerly known as Kanye West. The break with Ye and his popular Yeezy shoe brand has cost the company €400m ($441m) in lost sales. Additionally, the company is now left with €1.2bn ($1.3bn) worth of unsold Yeezy shoes after severing ties in October 2022 over Ye’s anti-Semitic and other offensive comments made through social media and interviews.

The company is “increasingly close to making a decision” about what to do with these shoes, according to new CEO Bjorn Gulden, who had declined to say whether the destruction of shoes had been ruled out. However, the company was “trying to avoid” that. Speaking on a conference call last Friday, Gulden said that there were many stakeholders involved in the discussions, which is why no decision had been reached yet. Other options have drawbacks, ranging from paying royalties to Ye to sell the sneakers, to being dishonest if the shoes are sewn up and expected resales if they are given away to people in need because of their high market value.

Gulden said the loss of the Yeezy brand “obviously hurts us” and called this development a “transitional year” that will lead to “a better ’24 and a good ’25”. The break will cut earnings by €500m this year if Adidas decides not to sell remaining Yeezy shares. Furthermore, the company faces problems connected to the rapper. Investors sued Adidas a week ago in the US and claimed that the company was aware of Ye’s offensive remarks and harmful behavior years before breaking with him. However, the lawsuit, which represents people who bought Adidas stock between May 3, 2018, and February 21, 2023, was rejected by Adidas, which said that it would “vigorously” defend against them.

Adidas lost €600m in sales in the last three months of 2022 after ending the partnership with Ye, contributing to the company’s net loss of €513m. Gulden has said Adidas results are “a little better than we expected,” and the company looks to restart growth and move beyond its break with Ye. Despite this, an operating loss of €700m is still possible this year, mainly due to the €500m hit if it doesn’t sell existing Yeezy shoes.

The negative consequences of the break with Ye demonstrate that even large corporations must be prepared to protect their reputations when endorsing celebrities. Adidas experienced significant losses, and despite still being uncertain about what to do with its unsold products, it has already started to work on rebuilding its brand. If handled correctly, this situation could be used to re-energize Adidas’ brand and move it in a positive direction, which would help it for years to come.

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