Two months after terminating its sneaker partnership with Ye, formerly known as Kanye West, German sportswear company Adidas has been holding the bag of more than a half billion dollars worth of Yeezys, a new report from the Financial Times revealed.
Current and former executives confirmed unsold Yeezy shoes in Adidas warehouses are worth $530 million in potential revenue. They said Adidas is trying to find ways to sell the shoes under its own brand to avoid a massive impairment charge.
Adidas severed ties with Ye on Oct. 25, citing the rapper’s antisemitic comments that got him booted from multiple social media platforms. Corporate America also canceled Ye, including JPMorgan, the fashion magazine Vogue, the luxury fashion brand Balenciaga, talent agency CAA, and studio MRC.
FT pointed out that Adidas execs were worried for years that the sportswear company was overly reliant on the Yeezy brand. Last year Ye’s brand contributed an estimated $1.8 billion in annual revenue for the company, about 7% of total revenue.
One research analyst said Adidas never told investors “how big it [Yeezy brand] was and how important it was to growth … they didn’t want to highlight how reliant they’ve become on the brand.”
Even before Ye’s departure, Adidas sounded the alarm in early October about profits. It was the second time the company mentioned profit warnings since July. Waning consumer demand in China and western markets has led to an abundance of inventory piling up at the company’s warehouses.
Shares in Adidas, trading in Germany, are down 60% since the peak in mid-summer 2021.
Adidas better get cracking at building a new portfolio of influencers to sell all that inventory.