Adidas’ CEO is making no efforts to hide his predicament: He’s sitting on $1.3 billion (or 1.2 billion euros) worth of Yeezy product with no clear solution for how to get rid of it.
“Since I started here, I probably got 500 different business proposals for people who would like to buy the [Yeezy] inventory,” said Adidas CEO Bjørn Gulden, who joined as chief executive from Puma in January, during a Wednesday call with analysts discussing the company’s weak 2022 results. “But again, that will not necessarily be the right thing to do,” he said.
Adidas officially parted from the brand and its controversial founder Kanye “Ye” West in October and has since grappled with mitigating debilitating sales losses. In Q4, the German sportswear company’s revenues fell 1% in currency neutral terms to 5.2 billion euros, reflecting a negative impact of around 600 million euro related to the loss of the Yeezy business. Gulden noted that when the partnership ended in the fall, Adidas made the choice to continue producing items that were still in the process of being made in order to keep factory and manufacturing workers employed. Now that these last products have been completed, the question of what to do has become addressable and urgent.
In a call with analysts, Gulden was candid about the potential options that have come to the table. On one hand, he noted that selling the products as they are could potentially help lift sales, but would also carry a “reputational risk” for Adidas, which parted with Ye in light of repeated antisemitic statements in public settings. (Adidas previously indicated it might rebrand and sell existing Yeezy product to help mitigate losses.)
“That’s one extreme,” Gulden said. “The other side is to say we burn it or we do whatever it takes to destroy it and it disappears, then you have another issue,” he said, explaining how this move will anger people who see destroying the products as a “sustainability issue.”
Other potential solutions included selling the product at cost for no profit, selling it with a small margin and donating profits to charity or simply donating all the unsold shoes to charity. None of the solutions are fail-proof, though. On the latter suggestion, Gulden pointed out that the shoes’ high value on the resale market could prompt them to continue to circulate and not be worn among those who might need them.
“If you can’t sell and you can’t destroy, what’s your option?” said Gulden. “That’s why we haven’t made a decision on it, because it’s a very complicated issue.”
Gulden knows he can’t please everyone. And he isn’t banking on a perfect solution, opting instead for the path that “damages [Adidas] the least.”
Despite the controversial situation, Gulden praised Ye’s creative talent and mourned the loss of the business unit.
“If you look at that business, there’s no doubt that [ Ye ] is one of the most creative people that has ever been on the planet,” Gulden said. “I think the way this was taken to market is probably the best go-to-market job that any brand has done and it’s very sad that this is falling apart.”