The German sportswear giant, Adidas, seems to have reversed some of the anticipated financial losses with a recent surge in sales of the Yeezy shoes from their now-defunct partnership with the artist formerly known as Kanye West, according to the Financial Times. Orders for unsold Yeezy shoes have soared to over 508 million euros (about $565 million), exceeding even the company’s “most optimistic forecast.”
Surge in Sales
Adidas had ceased sales of Yeezy shoes after a series of antisemitic comments by Ye in October, resulting in an approximate $440 million hit to their first quarter sales. However, robust demand for the remaining stock has allayed fears at the company that the brand would become too toxic after a drop in marketing and Ye’s outbursts.
According to the company, these recent sales should reduce the projected operating loss of $775.1 million down to $498.3 million. The write-off for the remaining Yeezy inventory has also been reduced to $443 million. Moreover, the strong demand has opened up the possibility of future drops of the discontinued shoe line.
Financial Impact
Before the announcement of the Yeezy sales, Adidas had anticipated a significant loss this year, with group revenue in the second quarter falling by 5% to $5.9 billion and operating profit dipping from last year’s $434.1 million to $194.9 million. Despite the declining figures, the company’s gross margin rose 0.6 percentage points to 50.9%.
Charitable Contributions
Adidas has also pledged to donate a portion of the proceeds from Yeezy sales to charities working against antisemitism and racism. The discussions about the specific donations to individual charities are ongoing, with the company having shortlisted five charities in the US and China as a starting point.
- The company’s decision to make donations exceeding 8.5 million euros across these charities is under deliberation.
- The final amount donated will be significantly higher as Adidas is willing to pay a substantial share of the Yeezy profits to these causes.
Legal Dispute with Ye
Meanwhile, Adidas is engaged in a legal tussle with Ye, accusing him of “misusing nearly all of the marketing funds” for the Yeezy project. Ye admitted on the Nick Cannon podcast to spending $50 million on his “Sunday Service” gospel choir tour. However, he didn’t specify whether these funds came from Adidas. The artist argued that the Yeezy shoes were “selling themselves,” so he invested in the church instead of paying for ads.
Future Prospects
In a turbulent era for Adidas, marked by the end of the lucrative Yeezy partnership, antisemitic comments by Ye, and a predicted operating loss, the surprisingly robust demand for unsold Yeezy shoes has provided a beacon of hope. The funds raised will not only help the company weather the financial storm but will also serve as a significant contribution to organizations working against antisemitism and racism. Regardless of the controversy, the enduring appeal of the Yeezy brand signals that the Adidas-Yeezy saga may yet have further chapters to unfold.
While the fallout with Ye may see Adidas report its first operating loss in 31 years, the sales from the Yeezy inventory are set to alleviate these concerns. With the continued strong demand for the Yeezy brand, Adidas foresees potential future drops that could further improve the company’s financial performance.
