Adidas has a billion dollar Yeezy problem
When Adidas quietly closed the Yeezy Supply website last week, it was a marker of an inventory problem that is far from resolved.
With thousands of unsold pairs in the German sportswear giant’s warehouses, Adidas will take its first loss in three decades if its Yeezy sneakers are not sold. Adidas shares fell 12 percent on Friday, with the company facing its biggest crisis in years.
Not selling its Yeezy footwear means operating profits will be hit by 500 million euros. But that is not the full extent of Adidas’ woes. Adidas confirmed it would not issue any further drops and it urged retailers to stop selling the line after it terminated its contract with Kanye West, now known as Ye, after a series of anti-Semitic remarks. Other costs pertaining to the unsold merchandise and revising its strategies ramp up its losses to over 1 billion dollars.
Closing the Yeezy website prevents the sale of existing stock
The Yeezy website, which also served as a launchpad for Ye’s other brand collaborations, such as Gap and Balenciaga, can no longer be used to sell existing stock. While Adidas owns the IP rights to the designs, consumer demand is expected to be muted, and Adidas will be called out for selling a tainted collection. Analysts have warned Adidas to stay clear of relaunching the Yeezy shoe under its own brand. The designs, even if owned by Adidas, will forever be associated with Kanye West.
Yet the Yeezy impact on Adidas is only a part of the problem. Dwindling sales in markets such as China also prompted the company to make adjustments to its profit forecast last week. The brand’s long time collaboration with Beyoncé, the Ivy Park range, never hit the heights of Yeezy, with current sales down more than 50 percent, according to the Wall Street Journal. At 40 million dollars, that is well below initial estimates of 250 million dollars.
Looking for the next big thing
Adidas piggy-backed on Yeezy releases to also boost its own product lines and new silhouettes. The company is spiralling to find the ‘next big thing’ reported Business Insider.
In the public relations realm, Adidas did not score well this year in its unsuccessful attempt to sue Thom Browne for the luxury brand’s four stripe designs.
One light at the end of the tunnel could be that Adidas preferred to drop all the bad news to its investors in one media release, thereby no further downward revisions of its forecasts will be needed in 2023. Hopefully new CEO Bjørn Gulden will have a few more ideas up his three-stripe sleeves.