The fate of 1.2 billion euros ($1.3 billion). unsold Yeezy shares weighs on the German sportswear company as it seeks to reverse the trend from the loss of the lucrative sneaker line and the lingering fallout from its past ties to Ye.
Adidas ‘getting closer to a decision’ on what to do with the sneakers and ‘narrowing options’, new CEO Björn Gulden said on a conference call Friday after reporting a 400 million euro ($441 million) drop in sales earlier in the year.
But with “so many interested parties” involved in the talks, no decision has yet been made, he said.
Adidas is stuck with stacks of its flagship Yeezy brand shoes after ending its relationship with Ye in October over his anti-Semitic and other offensive statements on social media and in interviews.
Gulden, who became CEO in January after splitting from Ye, declined to say whether destroying the shoes had been ruled out, but that the company was “trying to avoid it”.
He has previously said other options have downsides: selling the sneakers would mean Ye would have to pay royalties, it would be dishonest to re-stitch them to remove the brand identification, and giving them away to those in need could due to their high market value lead to a resale.
Gulden declined to say how many pairs of Yeezy shoes Adidas is holding, “because then the consumer would know how many we have, and that could impact demand.”
The loss of the Yeezy brand “of course hurts us,” Gulden said in a statement. The Separation will reduce income by 500 million euros this year by 500 million euros if Adidas decides not to sell the remaining Yeezy shares, the Herzogenaurach-based company announced.
Net sales fell 1% to €5.27 billion in the first quarter and would have been up 9% with the Yeezy line, the company said. It reported a net loss of 24 million euros, down from a profit of 310 million euros in the same period last year.
Operating profit, which excludes some items such as taxes, fell to 60 million euros from 437 million euros in the previous year.
Gulden said results for Adidas were “slightly better than we expected” as the company looks to resume growth and move beyond the Ye split. He called 2023 “a year of transition” on the road to “a better 24 and a good 25.”
The company faces other issues related to the rapper. Investors sued Adidas a week ago in the US with allegations that the company knew of Ye’s offensive comments and harmful behavior years before the split and failed to take precautions to limit financial losses.
The lawsuit – which represents people who bought Adidas securities between May 3, 2018 and February 21, 2023 – cited comments made in 2018 suggesting slavery was an “option” and reports about Ye who made anti-Semitic statements in front of Adidas employees.
The company said last week that it “dismisses these baseless allegations and will take all necessary action to vigorously counter them.”
The termination of the Ye partnership also cost Adidas 600 million euros in lost sales in the last three months of 2022, which helped the company post a net loss of 513 million euros.
An operating loss of 700 million euros is possible this year, Adidas said, mainly due to the 500 million euro hit it would take if it didn’t sell the existing Yeezy shoes.
—————————————————-
Source link