Adidas, the German sportswear giant, has made €400 million ($437 million) from the initial drop of Yeezy sneakers following its separation from Kanye West, formerly known as Ye. The move comes as Adidas seeks to offload unsold Yeezy shoes while contributing part of the proceeds to organizations combatting anti-Semitism and other forms of hate.
How the Events Unfolded
The first batch of Yeezy shoes, released in June, quickly sold out, aiding Adidas in achieving an operating profit of €176 million in the second quarter, surpassing its original expectations. A second sale began on Wednesday, continuing the successful momentum.
The partnership with Kanye West came to an end in October after his series of anti-Semitic and offensive remarks, prompting Adidas to seek a responsible method to dispose of approximately €1.2 billion worth of high-end Yeezy shoes. Rather than destroying or writing off the inventory, the company’s CEO, Bjørn Gulden, who assumed the role in January, decided to carefully sell off the remaining Yeezy inventory while making substantial donations to organizations fighting against hate, such as the Anti-Defamation League, the Philonise & Keeta Floyd Institute for Social Change, and Robert Kraft’s Foundation to Combat Anti-Semitism.
Adidas has already contributed €10 million to these groups and plans to donate an additional €100 million, with the potential for further donations depending on the performance of future Yeezy sales, according to Chief Financial Officer Harm Ohlmeyer.
While some Jewish civic leaders stated that they weren’t planning to buy Yeezys themselves, they generally welcomed Adidas’ effort to support anti-hate organizations, acknowledging that the company is trying to make the best out of a challenging situation.
Impact of the sale
Bjørn Gulden emphasized that the Yeezy sales not only bolster the company’s cash flow and financial strength but also serve to offload excess inventory responsibly. The first sale accounted for around 20% to 25% of the Yeezy sneakers in storage, contributing €150 million to Adidas’ €176 million operating earnings in the April-to-June quarter.
However, Ohlmeyer clarified that the Yeezy contribution might appear larger than it actually is because it does not cover many of the company’s costs.
Adidas cautioned that while the first sale saw a complete sell-out, it included the highest-priced shoes, and it remains uncertain whether future releases will witness similar price levels and demand.
The Kanye West Situation
The termination of the partnership with Kanye West put Adidas in a precarious position due to the immense popularity of the Yeezy line. Facing mounting pressure from the public and other companies distancing themselves from the rapper, Adidas chose to dissolve the contract, which is now in arbitration. Gulden acknowledged that the process is being handled by legal representatives from both sides, adding to the overall uncertainty surrounding the situation.
As for potential royalty payments to Kanye West on Yeezy sales, Adidas only stated its commitment to observing all contractual obligations.