Adidas issued a warning on Wednesday that the lingering impact from its now-discontinued partnership with Kanye West, which was a major factor in the company’s $763 million fourth-quarter loss, might cause it to post its first annual loss in more than three decades.
According to chief executive Bjørn Gulden, 2023 will be a “transition year,” as the German sportswear company attempts to sell off its stock of Yeezy, the wildly successful fashion line it co-founded with the rapper now known as Ye, and refocus on its core business. In 2024, he suggested, the organization may start to establish a successful enterprise once more.
“Adidas has all the ingredients to be successful. But we need to put our focus back on our core: product, consumers, retail partners, and athletes,” Gulden said in a statement.
After a series of incidents, beginning with him walking out of his Paris Fashion Week show wearing a “White Lives Matter” T-shirt, the company cut ties with the artist in late October. Days later, he continued his antisemitic rhetoric in remarks on Twitter and Instagram, as well as in an unaired podcast interview with Fox News presenter Tucker Carlson.
Adidas responded more slowly than Ye’s other business partners to criticism from celebrities, politicians, and Jewish organizations directed at the artist. He had broken up relationships with companies like JPMorgan Bank and Balenciaga weeks earlier.
It then had to decide what to do with Yeezy shoes estimated to be worth $500 million. Adidas stated in February that if it couldn’t repurpose the products, it may lose 1.2 billion euros ($1.3 billion) in income this year.
According to industry analysts, Adidas could liquidate, donate, sell rebranded shoes, or destroy them, but each option had disadvantages.
According to Bloomberg News, Gulden stated on Wednesday that Adidas has ruled out rebranding, giving away, or burning the footwear. But he said that the business would be willing to sell them and give the proceeds to a good cause.
“There are so many people that have an interest in this from different communities from around the world,” he said. “I’ve only been involved in this for seven weeks, and I don’t feel qualified to make a decision based on the facts I have.”
Nonetheless, it seems that there is a market for the product. Since Adidas and Ye split ways last fall, the CEO of Impossible Kicks, a sizable online retailer, told CNN last week that Yeezy sales have increased by 30%.
If the business “irrevocably” decides not to sell any of its Yeezy inventory, it might suffer a 700 million euro loss by 2023. But it faces other issues, analysts say, including diminishing demand in China and how the business will cover the revenue hole left by the Yeezy brand.
The Wall Street Journal stated that Beyoncé’s collaboration with Adidas on the Ivy Park clothing line has not been successful. Moreover, Tom Nikic, a Wedbush analyst, claimed in February that Adidas has yet to discover “the next big thing” in response to the company’s disclosure of its possible Yeezy losses.
Adidas is “in a competitive industry and they haven’t exactly had their A-game for several years now,” he said. “So it does make it tough.”
