Adidas has finally zeroed in a solution to manage the $1.3 billion (or 1.2 billion euros) worth of Yeezy product it has been sitting on since the company split from brand founder Kanye West and ended its Yeezy business in October.
After weighing a variety of options, CEO Bjørn Gulden told investors at the company’s annual meeting on Thursday that Adidas would start selling Yeezy products and donate the proceeds to charity. Gulden, who spoke in German, said the proceeds would go to organizations representing people who “were hurt” by Kanye West’s comments and behaviors, according to a translation. Adidas plans to sell individual parts of the Yeezy inventory as well, though not all the details have been worked out yet.
Adidas parted with West in light of repeated antisemitic statements. Since then, the company has grappled with debilitating sales losses. In Q4, the German sportswear company’s revenues fell 1 percent in currency neutral terms to 5.2 billion euros, reflecting a negative impact of around 600 million euro related to the loss of the Yeezy business. And last week, Adidas reported a revenue decline of 1 percent to 5.27 billion euros. Gulden said Adidas’s Q1 sales growth would have been 9 percent if not for the Yeezy problem.
In a call with analysts last quarter, Gulden was candid about the potential options that have come to the table regarding the Yeezy issue. He said selling the products as they are could potentially help lift sales, but would also carry a “reputational risk” for Adidas, which parted with Ye in light of repeated antisemitic statements in public settings. (Adidas previously indicated it might rebrand and sell existing Yeezy product to help mitigate losses.)
“That’s one extreme,” Gulden said. “The other side is to say we burn it or we do whatever it takes to destroy it and it disappears, then you have another issue,” he said, explaining how this move will anger people who see destroying the products as a “sustainability issue.” He also floated the idea of selling them and donating the proceeds to charity or simply donating all the unsold shoes to charity.
In the conversation with investors, Gulden did not name specific charities. It was also unclear if all the proceeds or just a portion would be donated.