Leftover Yeezy’s are helping Adidas climb out of major debt when online orders totaled $565 million. Inventory had piled up after the German sportswear brand severed ties with the rapper formerly known as Kanye West. The multimillion-dollar selloff means the company likely won’t have to take a big writedown on its remaining Yeezy merchandise.
The Breakdown You Need To Know:
Since cutting ties with Ye, the artist formerly known as Kanye West in October of last year, the company expected to clock an operating loss upwards of 700 million euros ($772 million) in 2023 due to the unsold stock of Yeezy footwear. Instead, Adidas put its first batch of Yeezys up for sale last month and sold off four million sneakers within 48 hours, according to the Financial Times. Fifteen Yeezy models were on offer ranging from $70 to $260.
Earlier this year, Adidas’ CEO stated during their earnings call that “2023 will be a bumpy year with disappointing numbers, where maximizing our short-term financial results is not our goal.
He also admitted that the loss of the Yeezy brand is “of course hurting us.” However, the German footwear and apparel company claims it has all the patents and copyrights for the IP, designs, and colorways, and it can omit the branding and continue selling the shoe. In February 2023, Adidas quietly shut down the Yeezysupply.com website.
Yearning For Another Yeezy:
The world’s second-largest sports brand was faced with about $1.3 billion worth of unsold Yeezy shoe inventory. However, Adidas’ main problem is its strategy over the last few years that has centered on partnerships with other artists including Bad Bunny, Pharell Williams, and Beyoncé that haven’t always met financial expectations, CultureBanx reported. Sales for Ivy Park fell more than 50% to $40 million in 2022, far below the $250 million Adidas projected, according to the Wall Street Journal. The existing contract between the musician and the brand, which pays the former $20 million annually, was already set to expire at the end of this year.
Adidas reported a 1% dip in year-over-year Q1 revenue, even though analysts predicted a 4% drop. The sportswear giant made $5.82 billion in Q1 2023 revenue. Comparison revenue drag on the company’s year-over-year numbers due to the discontinuation of the Yeezy business, was mainly across the North America, Greater China and EMEA regions. The company’s Q2 results will be released on August 3rd.
What’s Next:
A significant portion of the profits from the June sale will be donated to five organizations that combat racism and antisemitism, including the Anti-Defamation League and the Philonise & Keeta Floyd Institute for Social Change, founded by George Floyd’s brother. Those donations could exceed $9 million.
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