Adidas struck gold with leftover Yeezy inventory that had piled up in warehouses following its ill-fated tie-up with the rapper formerly known as Kanye West — receiving online orders that totaled $565 million, according to the Financial Times.
The German sportswear brand put its first batch of Yeezys up for sale last month and sold off 4 million sneakers within 48 hours, people familiar with the sale told FT.
The sources added that surprisingly high demand for the sneakers — which were yanked off the market in October following Ye’s antisemitic remarks — meant Adidas wouldn’t be able to meet all the orders.
However, the multimillion-dollar selloff means the company likely won’t have to take a big writedown on its remaining stock.
Adidas has said that a significant portion of the profits from the June sale will be donated to five organizations that combat racism and antisemitism, including the Anti-Defamation League and the Philonise & Keeta Floyd Institute for Social Change, founded by George Floyd’s brother.
Donations could exceed $9 million, FT reported, though a final decision hasn’t been made.
Sources added that the final amount gifted to these organizations could be far greater as Adidas is prepared to pay out a “significant share” of the profit from its Yeezy sale, according to the outlet.
Ye will reportedly receive royalties on the sale, tough it’s unclear how much.
Forbes estimated that Ye made $220 million annually from the partnership, which began in 2019.
Proceeds from the sale are also going to be used to pay costs associated with ending the partnership, including legal fees, closure of production capacity and laying off staff.
Representatives for Adidas declined to comment.
By 2019, Yeezy eclipsed $1 billion in sales annually, skyrocketing Ye’s net worth. However, Ye fell out of the billionaire ranks after a string of public meltdowns pushed Adidas to cut ties.
Adidas CEO Bjørn Gulden said in March that Adidas would “probably not make a profit” on its remaining Yeezy inventory.
The world’s second-largest sports brand also warned that it may have its first operating loss in 31 years, according to FT.
Adidas reportedly consulted with “a diverse group” of employees and organizations before deciding to release the apparel on its app, “Confirmed.”
Fifteen Yeezy models were on offer ranging from $70 to $260.
Sources told FT that the popular 500 Utility Black sneakers, which average about $300 a pair on online reseller StockX.com, sold in Europe within hours.
Gulden previously said the company considered burning the apparel, though the move would’ve resulted in sustainability issues and a writeoff that exceeded $554.8 million, FT reported.
Following its hasty, high-profile breakup from Ye, Adidas was faced with about $1.3 billion worth of unsold Yeezy shoe inventory.
Though the first-batch sale exceeded expectations, people familiar with the matter told FT, it’s unclear if Adidas will sell off a second batch of apparel.
Adidas had forecast a loss for the 2023 fiscal year before announcing its intentions to sell leftover Yeezy stock.
In Q1, Adidas saw a “20% sales decline in North America — down 5% excluding Yeezy,” according to its earnings statement.
The loss was attributed to boxing up “high levels of inventory” of its once-popular Yeezy shoes.
The brand’s Q2 results will be released on Aug. 3.
Credit: Source link
