2022 was not a good year for Adidas. With slowing sales in China, a sanctioned Russia and a Yeezy crisis, 2023 has already been christened with a probable operating loss of 700 million euros. This is largely due to the mountain of Yeezy stock Adidas has to reconcile.
The options are limited.
Selling the stock would lessen the losses but no doubt cause a new public relations disaster to its already fragile reputation, as the goods are ‘tainted’ with anti-Semitic sentiment.
Burning the stock to remove it from the marketplace, as Burberry did to unsold items in 2018, would solve the warehousing issue, but destruction would be an entirely unsustainable practise that could also prove a reputational risk and upset environmentalists.
Then there is the option of donating the stock, or selling off and donating the received funds to organisations and individuals compromised by Kanye West’s remarks.
Adidas’ CEO, Bjørn Gulden, who is but two months into the job, said solving the Yeezy dilemma is one of the most difficult of his career.
Yeezy is a tough business to loose
"You have the Yeezy business, which again, in my opinion, Ye is maybe the most creative, I would say, person that has ever been in our industry. The combination with an excellent go-to market job by Adidas in the product, in the manufacturing, and not least the way they went to market digitally with the different applications, and the way they were actually utilizing the heat, in my opinion, was next to nothing. And of course, losing that is a very tough thing. But anyway, we have lost it and we have to deal with that."
In response to donating the sneakers: "The people that are saying send the shoes to Turkey or somewhere where people don't have shoes or there has been a tragedy happening, I think you agree that these are not normal shoes.”
In the same call with analysts, Mr Gulden iterated: “We could sell (the Yeezy stock) with a small margin and give the margin away for different donations. We can sell them with more margin and give more donations. I think the goal that we have is to do what the probability is that it damages us the least and we do something good.”
“2023 will be a transition year to build the base for [the future]. We can then start to build a profitable business again in 2024," Mr Gulden said.
Article source: Business Insider, Business of Fashion