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Adidas plans to sell the remaining Yeezy inventory and donate the money

Adidas has spent months deciding what to do with $1.2 billion worth of unsold Yeezy brand merchandise piled up in its warehouses.

At one point, the company considered burning it all down but that option never materialized, CEO Bjorn Gulden said this week.

“Burning is not the answer,” he said at Adidas’ annual shareholder meeting on Thursday.

Instead, Adidas will sell the remaining Yeezy stock and donate the proceeds to charity.

“What we’re trying to do over time now is to sell some of this inventory and donate the money to the organizations that are helping us and that were hurt by Kahn’s statement,” Gulden said.

Gulden did not specify which companies would receive the grant, but offloading Yeezy products would finally close the book on the once-lucrative relationship between Adidas and Kanye West, now known as Ye.

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Eric Liedtke, a member of the Adidas Group Executive Board, was responsible for the global brand in 2016 with Yeezy creator Ye, then Kanye West.

Adidas

Adidas’ collaboration with the Chicago native officially began in 2016, with the company at the time calling the apparel and footwear deal “the most significant partnership ever made between an athletic brand and a non-athlete.” But the relationship broke up Last October After the rapper made anti-Semitic comments on social media. The German company’s decision to sever ties comes after weeks of pressure from celebrities and others.

Demand for Yeezy shoes among sneakerheads is skyrocketing Soon after Adidas announced.

Yeezy products accounted for about 10% of Adidas’ annual revenue last year By ending the partnership, the company predicts it will take a $246 million hit to its bottom line in the first year alone.

Adidas expects to lose another $1.3 billion in sales this year because Yeezy clothes and shoes will not be available, the company said. The lack of Yeezy apparel will also reduce operating profit by $534 million, the company projected to break even this year, Adidas said.

But losing Yeezy products won’t destroy the company. analysts told CBS MoneyWatch In October. They mentioned that Yeezy made the product Only a small fraction The sportswear giant sells about 300 million pairs of shoes each year.

“Big picture, we believe Adidas is one of the most well-positioned global athletic brands able to benefit from strong global athletics and athletic trends with enhanced efforts to address key consumer trends and improve long-term profitability,” Jonathan Komp, senior research analyst at Baird, said in a research note at the time.

Investors filed a class action lawsuit against Adidas last month, alleging that executives knew about Ye’s problematic behavior for years and postponed the partnership’s end. In the employee risk section of Adidas’ 2018 annual report, the company touted its commitment to a fair workplace “while failing to discuss how it routinely ignored Kanye West’s extreme behavior,” according to the lawsuit, which represents those who bought Adidas stock. Between May 2018 and February 2023. You are not named as a defendant in the case.

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Christopher J. Brooks

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