Adidas' 'Big Success' Is Now a 'Big Nightmare'

Adidas has about $1.3 billion worth of Yeezy sneakers idling in warehouses worldwide, the result of its split with Kanye West after a series of offensive remarks and actions by the rapper. Now the company is struggling to figure out what to do with the excess inventory in 2023, during what it's calling its "transition year," as it continues to contend with losing the brand that the New York Times calls "a defining force in the sportswear industry and an incredibly lucrative cornerstone" of the firm's bottom line. The Ye fallout only adds to the company's troubles, which include losing market share to Nike and Puma; a 35% sales plummet in its largest market, China, in 2022 amid COVID lockdowns; and a $62 million hit when Adidas opted to yank business out of Russia due to its invasion of Ukraine.

During a Wednesday call with analysts, Adidas Bjorn Gulden broached the topic of what the company might do with the footwear, noting that he doubted the branded inventory would ever be sold at full price or, on the other extreme, destroyed. Instead, he noted, the idea is to do "something good" in a way that results in the "least" damage to the company, per the Washington Post. One proposal being mulled is to sell the shoes for a reduced price, then hand over the profits to charity, per Gulden, who said he has so far received around "500 different business proposals [from] people who would like to buy the inventory." If that were to happen, West would still be entitled to part of the proceeds under his royalties contract.

Gulden says that "if we sell it, I promise that the people who have been hurt by this will also get something good out of this," per the Times, which notes that Jewish groups were among West's strongest critics after his antisemitic comments. Holly Huffnagle of the American Jewish Committee says that money raised by selling the footwear might be a "good start," but others in the Jewish community aren't sure that's the best move. Consumers still seem to be interested in the footwear, namely as a collectors' item, shoe chain Impossible Kicks tells the BBC, noting its sales of Yeezy products have risen 30% since the Ye-Adidas split. Still, it's a dilemma Adidas likely never thought it would find itself facing. "The reason it's become such a big nightmare is because it was such a big success before," says Morningstar analyst David Swartz, per the Post. (More Adidas stories.)