adidas Seeks Solution to $1.3 Billion YEEZY Problem
This article was first posted on February 10, and updated on March 9
Certainly, adidas made the right call to cut ties with Kanye "Ye" West and his YEEZY brand in October 2022. This was the turbulent month wherein Ye debuted YEEZY Season 9 — complete with infamous "White Lives Matter" T-shirt — blamed Virgil Abloh's death on LVMH CEO Bernard Arnault, and was subsequently dumped by everyone from Balenciaga to his touring agency.
To stay onboard the YEEZY train would have been to effectively guarantee brand suicide in the public's eyes; adidas had no other choice.
While adidas will eventually regain its place amongst sportswear's elite sooner or later, it does have to solve the small issue of $1.3 billion in unsold YEEZY products.
Essentially, adidashas two options: to either sell or dispose of the goods, with the former now reported to be the likely outcome. This does not yet confirm rumors that Kanye and adidas will reunite, however.
In the meantime, adidas is currently projecting a $738 million operating loss for 2023, its first negative income in over three decades.
Irrespective of losses, adidas' decision to cut Ye was the correct one.
It's not like he made life especially easy for adidas executives: Ye continued wearing Nike shoes and Balenciaga boots instead of adidas sneakers, for instance, and reportedly played pornography videos on his phone in adidas meetings.
The extenuating factor is, of course, the money. adidas estimated approximately $2 billion in yearly YEEZY sales, according to analysts, nearly 10 percent of its overall revenue.
A press release that adidas issued on February 10 points to 2024 as the year that adidas turns it all around.
“The numbers speak for themselves. We are currently not performing the way we should”, said new adidas CEO Bjørn Gulden. “2023 will be a year of transition to set the base to again be a growing and profitable company... 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.”
The announcement follows news that adidas' Ivy Park line isn't bringing in the revenue that adidas expected, with sales reportedly dropping over 50% since 2021's $90m haul.
Note that an Ivy Park representative disputed the claims, which suggest that the line earned a mere $40m in 2022, far lower than adidas' $250m expectations.
adidas is currently rumored to be working on a line of in-house sneakers that are nearly indistinguishable from YEEZY designs. In early 2023, it shut down YEEZY SUPPLY, the dedicated YEEZY drop website.
