Following the fallout from Ye’s controversial and anti-Semitic remarks, both the artist and Adidas, the manufacturer of his popular Yeezy line, suffered significant financial losses. With adidas severing ties with Ye in October, the company found itself burdened with tens of thousands of unsold Yeezy sneakers in storage, risking a substantial $1.3 billion revenue loss in 2023. However, the German brand has devised a daring plan: to relaunch the Yeezy collection. Despite being absent from the adidas website for several months, the sneakers and slides are once again available for purchase from May 31st. This bold move seeks to revitalize sales and mitigate the financial impact caused by the fallout with Ye.
SNEAKERS
After months of uncertainty surrounding the massive inventory of unsold Yeezys, a recent announcement by Adidas CEO Bjørn Gulden has shed light on the company’s plan. It has been revealed that adidas will be selling the remaining Yeezy inventory and allocating a portion of the proceeds to support social justice organizations. This decision reflects Adidas’ commitment to making a positive impact and contributing to the fight for equality and justice. By leveraging the popularity of the Yeezy line, adidas aims to turn unsold stock into a force for positive change.
Cutting Ties With Yeezy
The German sneaker giant, has announced the termination of its partnership with Ye last October, joining other businesses in distancing themselves from the rapper and designer. The decision comes in response to West’s recent anti-Semitic remarks and his public display of a shirt associated with white supremacists. In a statement, Adidas made it clear that they do not tolerate hate speech, including anti-Semitism, and West’s comments and behavior were deemed unacceptable and dangerous, contradicting the company’s values of diversity, inclusion, and mutual respect.
However, adidas had faced criticism for maintaining its partnership with West despite his public outbursts and accusations against the company. The Anti-Defamation League (A.D.L.) questioned the need for further review and increased pressure on the brand. Given its founder’s affiliation with the Nazi Party, adidas has a complex history with antisemitism and is expected to act responsibly to prevent the resurgence of such sentiments.
Financial Losses
Adidas incurred significant financial losses after severing ties with Ye, amounting to hundreds of millions of dollars. This decision contributed to a decrease in sales of $655 million during the last three months of 2022, ultimately leading to a quarterly net loss of 513 million euros. In the beginning of 2023, Adidas reported a further $441 million in lost sales. The company’s net sales in the first quarter declined by 1%, totaling 5.27 billion euros, and it experienced a net loss of 24 million euros, a significant drop compared to the 310 million euros profit recorded in the same period the previous year. Operating profit, excluding certain items such as taxes, also decreased to 60 million euros from 437 million euros compared to the previous year.
Releases and Restock
Adidas has announced its plans to commence the sale of a portion of the remaining adidas YEEZY inventory this May. The initial release was scheduled for the end of May 2023, and a range of existing designs are exclusively available through adidas.com/yeezy and the adidas CONFIRMED app. This release marks the first time that consumers have the opportunity to purchase YEEZY products since the termination of the partnership in October 2022. The available products include both existing designs and designs initiated in 2022 for sale in 2023. Additional releases of the existing inventory are being considered, but the exact timing is yet to be determined.
Charitable Donations
Alongside the sale, adidas decided to donate a significant amount of the proceeds to selected organizations dedicated to combating discrimination and hate, including racism and antisemitism. The Anti-Defamation League (ADL) and the Philonise & Keeta Floyd Institute for Social Change are among the organizations that will benefit from the donations.
The decision to sell and donate the remaining inventory came after careful consideration and extensive engagement with various stakeholders, including employees, organizations, communities, and consumers. The company’s priority was to responsibly manage the existing product and honor the designs and shoes created. This approach also ensures the protection of supply chain partners who were involved in the production orders committed to before the partnership termination. Adidas CEO Bjørn Gulden emphasized the commitment to fighting against hate in both sport and society, stating that the decision to release the remaining YEEZY products and support charitable initiatives is the best solution.
In addition to the charitable donations, adidas has announced a partnership with the Philonise & Keeta Floyd Institute for Social Change, led by Philonise Floyd, the brother of George Floyd. Together, they will focus on driving community programs through sport and education, aiming to create a lasting legacy and make a positive impact.
Royalty Arrangements
Adidas did not provide detailed information about the specific aspects of their plan regarding the sale of unsold stock and the disposition of the remaining inventory. The company has not disclosed the exact quantity of products they intend to sell or how they will handle the remainder. It is expected that Ye, as the designer of the Yeezy line, will continue to receive royalties from the sales of the remaining inventory. In response to inquiries, Adidas shared the statement made by CEO Bjørn Gulden during the meeting, which outlined their approach to the situation.
Adidas Faces Lawsuit
In late April, investors took legal action against Adidas by filing a class-action lawsuit. The lawsuit claims that the company had prior knowledge of offensive remarks and harmful behavior from Ye, known as Ye, long before terminating its partnership with him. Adidas has strongly denied these allegations and is actively defending itself against the lawsuit, asserting its position regarding its association with the artist.
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