Adidas could be forced to burn Yeezy sneakers worth about half a billion dollars after rapper and fashion designer Kanye West’s anti-Semitic outbursts.
The sportswear brand is grappling with what to do with its massive stock of shoes, which sell for between $200 and $600, after drastically cutting ties with the disgraced rapper last year.
Analysts now say Adidas, which has already said the debacle impacted revenues by $1.3 billion, could be forced to burn the shares – as it risks a PR nightmare if they continue to sell at a discount.
The company’s decision to drop West ended the rapper’s fall after a pattern of increasingly erratic behavior and anti-Semitic outbursts.
In October, he said in a social media post that he would go “death con 3 on Jewish people,” and then doubled down in media interviews with comments that included vile remarks about Jewish people.
Kanye West, photographed last October, was dropped by Adidas and several other brands after a series of anti-Semitic outbursts
Adidas is now stuck with Yeezy shares worth about $500 million — and may even decide to burn the stock rather than see it profit from a partnership with an anti-Semite
Wedbush analyst Tom Nikic told the Washington Post that the Yeezy line was worth about $2 billion a year in revenue to Adidas, adding, “What makes this so dramatic is how big it is.” He said the commercial dilemma was disrupted by the “abruptness” of West’s demise.
Nikic said stripping the sneakers off the Yeezy label and selling them at a discount as “zombie Yeezys” was a risk because the brand could still be seen as “benefiting from a partnership with someone who made blatant anti-Semitic statements ‘.
Burning or otherwise destroying the shoes would be the most extreme option – but it’s something other fashion brands have done before, albeit under different circumstances. Luxury brands such as Louis Vuitton and Burberry have previously faced criticism for burning unsold sales to preserve brand value.
Elizabeth Napier, an assistant professor at the University of Toledo, told the Post Adidas should offer the stock to charities to help with disaster relief efforts, including those providing relief after the earthquakes that recently hit Syria and Turkey.
Adidas CEO Bjorn Gulden, who joined Adidas on Jan. 1 after switching from rival Puma, warned earlier this month that the brand was “not performing as we should.”
Adidas’ decision to end its lucrative deal with West quickly ended sales of its footwear and clothing line.
Before the brand cut ties with West, the deal accounted for about three-quarters of his roughly $2 billion net worth. That collapsed overnight to about $400 million, according to Forbes, with much of his remaining wealth coming from his music catalog and real estate.
Adidas, which owns the rights to most of the Yeezy line, said upon termination of the partnership in October 2022 that it was ceasing “production of Yeezy-branded products and (ceasing) all payments to (West) and its companies.”
West reportedly earned about $500 million in royalty payments over the first four years of the deal through 2020 with Adidas. In November, the company proposed to continue with the designs, but stripped of the Yeezy name and brand. The announcement sparked speculation that the rapper could still be in line for some payments.
Following the decision to cut ties with West in October, owners of his Yeezy shoes rushed to get rid of his shoes, with searches for the phrase “selling Yeezy” increasing overnight by nearly 600. percent skyrocketed.
And the fallout continued to hit the German athletics brand, leading the company to issue its fourth profit warning in the past six months in February.
The new boss of the controversial company has promised a ‘transition year’ within Adidas to make the sportswear giant profitable again.
Adidas CEO Bjorn Gulden, who took over the sportswear brand in January, said the company is ‘not performing as we should’
West’s deal with Adidas brought the company billions of dollars in revenue
The split with West came just before the crucial pre-Christmas sale period, which forced Adidas to halve its 2022 profit forecast to €250 million in early November – and highlighted the risks some brands have taken in tying their fortunes to celebrities.
Adidas had previously cut its 2022 forecast to mid-single-digit sales growth in October in light of weaker demand in China and Western markets.
The company also incurred losses due to one-time costs related to leaving Russia after the invasion of Ukraine – but recent results showed that the company was doing even worse than expected.
Gulden said: “We have to put the pieces back together, but I am confident that in time we will make Adidas shine again. But we need some time.’
West lost his billionaire status last year after facing severe backlash over a series of anti-Semitic diatribes.
In addition to being dropped by Adidas, West also saw his annual $220 million deal with GAP terminated and his Yeezy line ripped from stores.
The 45-year-old shocked the world last year after a series of bizarre behaviors, including the introduction of a range of shirts in his ‘White Lives Matter’ clothing line during Paris Fashion Week.
He again offended his former fans during an appearance on the popular podcast Drink Champs, when he claimed that George Floyd died of a fentanyl overdose and that Derek Chauvin’s knee “wasn’t even that close to his neck.”
West has also said that he “can’t actually be anti-Semitic because black people are actually Jewish too.”