Adidas plans to sell leftover Yeezy merch and donate proceeds to charity
Adidas has spent months trying to decide what to do with $1.2 billion worth of unsold Yeezy brand merchandise that has been piled up in its warehouses.
At one point, the company thought about torching all of it but that option never materialized, CEO Bjørn Gulden said this week.
"Burning is not the solution," he said Thursday during the Adidas annual shareholders' meeting.
Instead, Adidas will sell the leftover Yeezy stock and give the proceeds to charity.
"What we are trying to do now over time is to sell parts of this inventory and donate money to the organizations that are helping us and that were also hurt by Kanye's statements," Gulden said.
Gulden didn't specify which organizations would get donations, but offloading the Yeezy products will finally close the book on the once lucrative relationship between Adidas and Kanye West, now known as Ye.
Adidas' collaboration with the Chicago native officially started in 2016, with the company at the time calling the clothing-and-shoe deal "the most significant partnership ever created between an athletic brand and a non-athlete." But the relationship disintegrated last October after the rapper made antisemitic remarks on social media. The German company's decision to cut ties came after weeks of pressure from celebrities and others.
Demand for Yeezy shoes among sneakerheads skyrocketed soon after Adidas made the announcement.
Yeezy products accounted for about 10% of Adidas' annual revenue last year. In terminating the partnership, the company predicted it would take a $246 million hit to its bottom line in the first year alone.
Adidas expects to lose another $1.3 billion in sales this year because Yeezy clothes and shoes will not be available, the company has said. A lack of Yeezy apparel will also reduce operating profit by $534 million, with the company projected to break even this year, Adidas said.
But losing the Yeezy products will not doom the company, analysts told CBS MoneyWatch in October. They noted that Yeezy products made up only a small fraction of the roughly 300 million pairs of shoes the sportswear giant sells each year.
"Bigger picture, we believe Adidas remains one of the better positioned global athletic brands capable of benefiting from strong global athletic and athleisure trends along with enhanced efforts to address key consumer trends and to drive better long-term profitability," Jonathan Komp, senior research analyst at Baird, said in a research note at the time.
Investors filed a class action lawsuit against Adidas last month, alleging executives knew about Ye's problematic behavior for years and stalled on ending the partnership. In the personnel risk section of Adidas' 2018 annual report, the company touted its commitment to having an equitable workplace "while failing to discuss how it routinely ignored extreme behavior from Kanye West," according to the lawsuit, which represents people who bought Adidas stock between May 2018 and February 2023. Ye is not named as a defendant in the case.