Soaring sales of left-over Yeezy trainers worth $562m has helped Adidas recoup huge losses incurred after they severed ties with rapper Kanye West over his anti-Semitic outbursts
- Adidas stopped selling Yeezy sneakers in October after West’s racist comments
- Adidas said it would donate some of the sales to charities tackling anti-Semitism
Unexpectedly high sales of leftover Yeezy stock following Adidas’ ill-fated and abandoned collaboration with the rapper formerly known as Kanye West over his anti-Semitic outbursts has helped the sportswear company recoup huge losses.
The German sportswear brand has managed to reduce operating loss this year to 450 million euros ($498.56 million), the company said Monday, after it sold off swathes of West’s – now known as Ye – shoes piled up in its warehouses following the severed collaboration.
Citing people familiar with the matter, the FT reported that four million pairs of Yeezy trainers were sold by Adidas for 508 million euros ($562 million) during an online sale of the stock in June – vastly more than expected.
Adidas initially stopped selling Yeezy sneakers in October after it terminated its lucrative partnership with the rapper turned fashion designer after a series of anti-Semitic outbursts.
But the company in May said it had decided to sell off the piles of its remaining Yeezy inventory as it would otherwise be forced to write off 500 million euros ($553 million) – adding to Adidas’ financial woes.
Adidas said it would donate a significant proportion of the sales to charities tackling racism and anti-Semitism.
Kanye West is pictured leaving the Burberry 2022 Catwalk Show during London Fashion Week in September 2022
Adidas said it would donate a significant proportion of Yeezy sales to charities tackling racism and anti-Semitism. Yeezy shoes made by Adidas are displayed at Laced Up, a sneaker resale store, in Paramus, N.J.
Amid the sale of Yeezy stock in June, the FT reported that Adidas was unable to meet demand for orders.
Those wanting to purchase West’s shoes were forced to register online in advance and submit their orders for the models they wanted.
The publication said that while the value or orders was more than 508 million euros ($562 million), the profit was lower.
The update from Adidas is likely to cheer investors betting that CEO Bjorn Gulden, at the helm since the beginning of the year, can turn Adidas’ fortunes around. The German company had previously forecast a full-year operating loss of 700 million euros ($775 million).
Although group revenue in the second quarter fell by 5 percent to 5.3 billion euros ($5.9 billion), Adidas’ gross margin rose 0.6 percentage point to 50.9 per cent, the company said on Monday in a preliminary release ahead of full second-quarter results expected on August 3.
Operating profit for the second quarter was 176 million euros ($194 million), down from 392 million ($434 million) a year earlier.
Adidas said the potential impact of a Yeezy stock write-off was now 400 million euros, down from 500 million euros expected previously. The company did not say exactly how much it sold of its Yeezy stock worth around 1.2 billion euros, but analysts estimate that around 15 percent of the stock has been liquidated.
Shares in Adidas have gained 37 per cent since the start of the year as investors hope Gulden can rebuild the brand after a chaotic break-up with Ye, or Kanye West, triggered by antisemitic comments he made in interviews and on social media.
Adidas CEO Bjoern Gulden attends the company’s annual news conference in Herzogenaurach, Germany, March 8, 2023
Kanye West is seen on October 21, 2022 in Los Angeles, California
The company, which in May said it would donate proceeds from Yeezy stock sales to non-governmental organisations including the Anti-Defamation League, did not specify on Monday how much it plans to give to charity.
‘If successful, potential future Yeezy drops would further improve the company’s results,’ Adidas said, referring to the term used for putting new products on the market.
The shoes’ popularity has endured despite Ye’s public pronouncements, with Yeezy shoes selling at high premiums on resale sites.
Adidas said the rest of its business also did ‘slightly better than expected’ in the second quarter.
Adidas’ decision to drop West capped the rapper’s fall from grace after following increasingly erratic behavior and anti-Semitic outbursts.
In October last year, West said in a social media post that he would go ‘death con 3 on Jewish people’, then doubled down in media interviews with comments that included vile remarks about Jewish people.
In a statement following their split with the rapper last year, the German sportswear company said: ‘Adidas does not tolerate antisemitism and any other sort of hate speech.
‘Ye’s recent comments and actions have been unacceptable, hateful and dangerous, and they violate the company’s values of diversity and inclusion, mutual respect and fairness.’
The partnership between the German giant and West began in 2013, after he let a collaboration with Nike, and was expected to be a ten-year-long production. As part of the initial deal, Adidas payed West an annual royalty fee to sell the products, while the rapper still owned the Yeezy brand.
Kanye West speaks on stage at the ‘Kanye West and Steven Smith in Conversation with Mark Wilson’ event on November 7, 2019, in New York City
Kanye West attends the ‘The Greatest Lie Ever Sold’ Premiere Screening on October 12, 2022 in Nashville, Tennessee
Adidas, whose founder Adi Dassler belonged to the Nazi Party, found themselves coming under increasing pressure to drop Kanye after the anti-Semitic comments.
Amid the erratic behavior before the severed deal, West also introduced a series of shirts branded with ‘White Lives Matter’ at Paris Fashion week.
During an episode of Drink Champs podcast with N.O.R.E, West also claimed that George Floyd died from taking fentanyl and that Derek Chauvin’s knee ‘wasn’t even on his neck like that.’
Floyd’s family later lodged a $250million lawsuit against West over the comments, calling them ‘repugnant’ and saying he used ‘false statements’ to ‘promote his brands’.
Kanye also made the incorrect claim that he is the ‘richest black man in American history’ – a title that belongs to Vista Equity’s Robert F. Smith.
He said: ‘A lot of this stuff for me as the richest black man in American history, that put $140million in JP Morgan, and never even had a chance to… not even get to deal with them. We’ll speak at a different time.’
In 2021, West was inaccurately described as the richest man in America after Bloomberg reported the valuations of his companies at $6.6billion.
Much of that figure came from sales that hadn’t yet been realized and were never an indication of his personal wealth – with Forbes estimating his net worth at around $1.8billion.
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