Adidas has announced its plans to sell the remaining stocks of Yeezy sneakers, which were part of its partnership with Kanye West. The decision comes after the company ended its collaboration with the rapper and fashion designer due to his controversial remarks. Despite the separation, the demand for Yeezy sneakers remains high in the resale market. The move is a strategic one for Adidas, as it aims to recoup some of the losses caused by currency fluctuations and the discontinuation of the Yeezy business.
The discontinuation of the Yeezy business and price cuts to wholesalers resulted in a significant impact on Adidas’ finances, with an estimated loss of €1 billion ($1.08 billion; £850 million). However, the company managed to post an operating profit of €268 million in 2023 and expects to almost double that figure this year. The improvement can be attributed to the better operating business and the decision to not write off €268 million worth of Yeezy inventory.
To drive the turnaround of Adidas following the breakup with the Yeezy brand, Bjørn Gulden was appointed as the company’s new CEO. The partnership’s termination left Adidas with unsold sneakers valued at around €1.2 billion. Although the company sold some of its Yeezy stock last year, net sales from the partnership were significantly lower than in 2022.
Adidas now aims to sell its remaining Yeezy stock at least at the cost of production in order to recoup some of the losses incurred. However, there is still a possibility of a write-off of the remaining Yeezy items, which could cost the company around €300 million. The company’s latest financial outlook is further impacted by the devaluation of the Argentine Peso, which was initiated by Argentina’s new President Javier Milei. The devaluation, amounting to more than 50%, has resulted in a challenging financial situation for Adidas and other sportswear firms operating in the region.
Adidas has been producing shirts for Argentina’s national football team for several decades, and the devaluation of the Argentine Peso has affected its profitability. Puma, a rival sportswear brand, also endured financial implications due to the devaluation, as the region served as its biggest and fastest-growing market.
The decision to sell the remaining Yeezy stock and the potential write-off of certain items reflect the efforts of Adidas to navigate challenging circumstances and recover from the losses incurred through its partnership with Kanye West. The company aims to optimize its financial performance and regain stability in the market.
