Adidas may face its first operating loss in 30 years because of issues with sales of products under the Yeezy brand. The failure to cooperate with Kanye West puts the German sports giant’s business in a difficult position.
Preliminary estimates put Yeezy’s inventory at $1.3 billion. If the company decides to destroy them, it would mean huge reputational risks, including damaging the planet. Adidas also sees no prospect of transferring the rights to Yeezy merchandise to an outside company to resell or distribute the clothes and shoes to those in need in Turkey and Syria.
“People who say we need to send shoes to Turkey or somewhere else where people don’t have shoes or there’s been a tragedy, I think you would agree that these are not ordinary shoes. The value of the product is not the physical value of the ingredients. It’s the brand and the product that sells at a high price,” the company commented.
2023 should be a year of recovery for Adidas, given the problems of falling sales in China. Due to Kanye West’s contract breakup, the company is extremely cautious about its outlook with Yeezy products.
“If you can’t sell and you can’t destroy, what’s the solution? That’s why we haven’t decided on this issue yet, because it’s a very complicated issue,” the company added.
After resolving the problematic Yeezy issue, the company will promote its classic Samba, Gazelle and Spezial silhouettes. Demand for the sneaker continues to grow in Asia, Europe, North America and Latin America.
In its latest financial report, Adidas reported a drop in profits and a significant operating loss (more than 480 million euros) for the fourth quarter. Revenue is expected to continue to decline through 2023, mainly due to the termination of its partnership with West. The operating loss for the year will be €700 million, including €500 million due to the write-off of Yeezy.
