Adidas could be forced to burn $500M Yeezy stock over Kanye outbursts
07.03.2023
Adidas could be forced to burn Yeezy sneakers worth around half-a-billion dollars after rapper and fashion designer ‘s anti-Semitic outbursts.
The sportswear brand is struggling over what to do with its massive stockpile of the shoes, which retail for between $200 and $600, after it dramatically cut ties with the disgraced rapper last year.
Analysts now say Adidas, , could be forced to burn the stock — because it risks a PR nightmare if they are still sold at a discount.
The company’s decision to drop West capped the rapper’s fall from grace after a pattern of increasingly erratic behavior and anti-Semitic outbursts.
In October, he 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.
Kanye West, pictured in October last year, was dropped by Adidas and several other brands after a series of anti-Semitic outbursts
Adidas is now stuck with Yeezy stock worth about $500 million — and could even decide to burn the stock rather than be seen profiting from from a collaboration with an anti-Semite
Wedbush analyst Tom Nikic told the that the Yeezy line was worth about $2 billion per year in revenue for Adidas, adding: ‘What makes this so dramatic is how big it is.’ He said the commercial dilemma was confounded by the ‘abruptness’ of West’s downfall.
Nikic said stripping the trainers of the Yeezy label and was a risk because the brand could still be seen as ‘profiting off of a collaboration with someone who made blatant anti-Semitic statements’.
Burning or otherwise destroying the shoes would be the most extreme option — but it is something other fashion brands have done previously, albeit under different circumstances.Luxury brands like Louis Vuitton and Burberry have previously faced criticism for burning unsold sold to preserve brand value.
Elizabeth Napier, an assistant professor at the University of Toledo, told the Post Adidas should offer the stock to charities to help with disaster relief, including those supplying aid following the earthquakes which recently hit Syria and Turkey.
Adidas CEO Bjorn Gulden, who joined Adidas on January 1 after switching from rival Puma, warned earlier this month that the brand was ‘not performing the way that we should’.
Adidas’ decision to end its lucrative deal with West brought a swift end to sales of his shoes and apparel line.
Before the brand cut ties with West, the deal accounted for about three quarters of his roughly $2 billion net worth.That collapsed overnight to about $400 million, according to Forbes, with much of his remaining wealth derived from his music catalogue and real estate.
Adidas, which owns the rights to most of the Yeezy line, said after the partnership ended in October 2022 that it was ending production of ‘Yeezy branded products and [stopping] all payments to [West] and his companies’.
West reportedly earned about $500 million in royalty payments through the first four years of the deal to 2020 with Adidas. In November, the company suggested it would continue with the designs, but stripped of the Yeezy name and branding.The announcement prompted speculation the rapper could still be in line for some payments.
Following the decision to cut ties with West in October, owners of his Yeezy shoes raced to get rid of his shoes, with searches for the term ‘sell Yeezy’ skyrocketing almost 600 percent overnight.
And , leading the firm in February to to issue its fourth profit warning in the last six months.
The embattled company’s new boss has promised a ‘year of transition’ within Adidas to make the sportswear giant profitable again.
Adidas CEO Bjorn Gulden, who took the helm at the sportswear brand in January, has said the company is ‘not performing the way that we should’
West’s deal with Adidas brought the company billions of dollars in revenue
The breakup with West came just before the crucial pre-Christmas sales period, forcing Adidas to halve its 2022 profit outlook in early November to 250 million euros — and highlighted the risks some brands have taken by tying their fortunes to celebrities.
Adidas had previously lowered its 2022 forecasts in October to mid-single digit percentage revenue growth in light of weaker demand in China and lil peep Western markets.
The company also suffered losses due to one-off expenses related to its exit from Russia following its invasion of Ukraine — but recent results showed the company had fared even worse than expected.
Gulden said: ‘We need to put the pieces back together again, but I am convinced that over time we will make Adidas shine again. But we need some time.’
West lost his billionaire status last year after facing severe backlash for a series of anti-Semitic rants.
As well as being dropped by Adidas, West also saw his $220 million annual deal with GAP terminated and his Yeezy line ripped from its stores.
The 45-year-old shocked the world last year following a string of bizarre behavior, including introducing a series of shirts to his fashion line with ‘White Lives Matter’ at Paris Fashion Week.
He again offended his former fans during an appearance on popular podcast Drink Champs, when he claimed that George Floyd died from a fentanyl overdose and that Derek Chauvin’s knee ‘wasn’t even on his neck like that’.
West has also said he ‘actually can’t be anti-Semitic because black people are actually Jew also.’