After walking away from Kanye West last year, sneaker maker Adidas AG is still trying to figure out what to do with nearly $1.3 billion worth of tarnished, leftover gear that’s still branded in the rap megastar’s name.
“ “If you can’t sell and you can’t destroy, what’s your option?” ”
Adidas ADDYY, +2.59% last year ended its partnership with West, who now goes by Ye, after he made a string of antisemitic remarks, and the shoe-maker said it would stop making Yeezy-brand products. But during the company’s earnings call on Wednesday, executives and analysts signaled that Adidas was caught between reputational demands and environmental ones as it weighs how to unload that unsold gear.
During the call, an analyst pointed out the difficulties of either selling or destroying the gear, and asked Chief Executive Bjorn Gulden what Adidas’ options were for getting rid of it all.
“I ask you,” Gulden responded. “So if you can’t sell and you can’t destroy, what’s your option?”
“People will say, ‘you cannot destroy it’ because it’s a sustainability issue, right?” Gulden continued. “So ‘please don’t destroy.’ And on the other side, ‘please don’t sell’ because you have a reputation issue.
“So if you say you’re confused, I can just say that’s the fact, and that’s why we haven’t made a decision on it because it’s a very complicated issue,” he said.
The piles of shoes have weighed on Adidas’s stock, which has fallen 22.7% over the past 12 months but finished 2.6% higher on Wednesday. Adidas executives last month said that not selling the leftover Yeezy products could lead to 1.2 billion euros — roughly $1.27 billion — in lost sales.
Gulden, during the call, said that the company opted not to halt production on the Yeezy brand to preserve jobs for its thousands of factory workers. He added that Adidas could end up giving away the shoes — or proceeds from sales.
“We could sell the product at cost, and it will be a zero thing,” Gulden added during the call. “We could sell it with a small margin and give the margin away for different donations. We can sell them with more margin and give more donations.”
“I think the goal that we have is to do what the probability is that it damages us the least, and that we do something good,” he added.
For more: Adidas would pay royalties to Kanye West in case of Yeezy selloff, CEO says
Gulden said he had likely received hundreds of business proposals from others who wanted to buy up the Yeezy leftovers.
As Ye’s baggage grows, Gulden said “there’s no doubt that Ye is one of the most creative people that has ever been on the planet. I think the way this was taken to market is probably the best, I would say, go-to-market job that any brand has done and it’s very sad that this is falling apart.”
But he said complications could arise from giving the shoes away — even to a nation like Turkey, where earthquakes last month killed tens of thousands of people.
“The people that are saying, send shoes to Turkey or somewhere that — where people don’t have shoes or there has been a tragedy happening — I think you agree that this is not normal shoes,” he said. “So if you did that, they will come back again because the value of the product is not the physical value of the ingredients. It is the premium because it’s the branded merchandise that is sold at a high price.”
More: Adidas credit downgraded as demise of Kanye West partnership sparks earnings concerns
Add Comment