Adidas Has $500 Million In Kanye West Shoes And No One Knows What To Do With Them

Adidas recently broke business ties with Kanye West (Photo: Instagram/@cultu-popm)

Shortly after the NFL star Michael Vick was charged in July 2007 with running a dogfighting operation, Nike suspended the launch of its shoe line. Vick pleaded guilty and had his contract suspended, but it’s not so clear what exactly happened to all those sneakers.

Nike wouldn’t say so, but industry analyst Matt Powell believes it destroyed its supply of Air Zoom Vick Vs.

Adidas now has a similar dilemma with its Yeezy line., say observers, except on a scale never before seen in the fashion industry. Months after cutting ties with the rapper and fashion designer Kanye West For its blatant anti-Semitism, the German company warned on February 9 that it faced massive losses if it couldn’t sell its inventory, raising questions about its options for the now-smeared brand, including literally burning the shoes.

Kanye West (Reuters)
Kanye West (REUTERS) (Reuters Photographer /)

This is a significant change from the November forecasts, when company officials said they could recover the “vast majority” of the losses by rebranding the signature shoes – which cost between $200 and $600 – and selling them at a discount.

The situation offers a glimpse of what happens when a fashion line suddenly comes to an end.. And experts say the decision, which Adidas has said is still months away, will be especially difficult because the company faces hurdles. ethical and financial on every step.

Bjørn Gulden, newly appointed CEO, said this month that the company may not sell any existing products, which analysts value at between $300 million and $500 million. The company said it could lose up to €1.2 billion ($1.3 billion) in revenue this year and €500 million in operating profit if it can’t reconvert the merchandise.

Adidas 'Yeezy'
Adidas ‘Yeezy’ (Hollie Adams/)

What makes this so dramatic is how big it is.Wedbush analyst Tom Nikic said, noting that the Yeezy brand was making nearly $2 billion a year. “That’s really a big and substantial part of the business. [de Adidas] – and the abruptness with which it happened” is also remarkable.

The company ended its relationship with the artist, who now goes by Ye, at the end of October, after a series of controversies that began when he appeared in a T-shirt of “White Lives Matter” (White Lives Matter) at her Paris Fashion Week show. Days later, she did antisemitic comments on Instagram and Twitter, then doubled down on that rhetoric in a podcast and in an unaired portion of an interview with the host of foxnews Tucker Carlson.

Celebrities, political leaders and Jewish organizations condemned the artist and appealed to Adidas, which took longer to act than its other business partners. Balenciaga, JPMorgan Chase and other companies had ended their relations with him weeks before, and Gap announced that it would stop selling its products.

Archive image of rapper Kanye West (REUTERS/Randall Hill)
Archive image of rapper Kanye West (REUTERS/Randall Hill) (Randall Hill/)

Adidas could still go ahead with a plan to sell the merchandise at a discount, without the label, Nikic said, transforming them into what he calls, “Zombie Yeezys.”

“But that’s frankly a risky proposition.”Nikic said. “It could be counterproductive from a public relations standpoint. It would still appear that they were benefiting from a collaboration with someone who made blatant anti-Semitic statements.”

Another option is to liquidate the remaining merchandise through discount stores like TJ Maxx or sell it by the pound to a middleman who could then distribute it to retailers in developing countries, said Mark Cohen, director of retail studies at Columbia University.

“This is common practice in less developed countries, where products reach the local market,” Cohen explained.

Experts say that liquidation is a normal part of the retail business. For example, Allbirds, a shoe company, announced in August that it would have to sell off nearly $12 million worth of apparel after a failed foray into sportswear, such as leggings. The company did not respond to questions about how those products were dispersed.

Cohen is convinced that the Yeezys will eventually reach consumers. “Almost everything you can imagine being made in the world is sold somewhere, somehow, at some price,” he said. “And these high-value Kanye West sneakers are going to end up on people’s feet – maybe people who value the Kanye association or [personas] those who don’t care; they just want fresh, clean, modern shoes.”

Another option is to destroy the shoes, a practice that some experts say is still commonplace in the industry despite ethical and environmental concerns. Nike has cut up the shoes it decided not to sell at its New York SoHo store, reported the New York Times in 2017. Other fashion brands – such as Coach, Victoria’s Secret and Louis Vuitton – have received negative attention in recent years for destroying their merchandise in an effort to preserve their brand equity. In 2018, Burberry said it would end the practice of burning unsold merchandise after announcing that it destroyed some $37 million worth of merchandise.

But analysts say that would be the worst outcome, one that makes little financial sense and comes with its own public relations pitfalls.

Elizabeth Napier, an associate professor at the University of Toledo who has studied how fashion companies dispose of unsold products, said the best option for Adidas would be donate the shoes to disaster reliefas the efforts in Turkey and Syria after an earthquake in February that killed more than 46,000 people.

I don’t know why they don’t right nowNapier said.

According to Cohen, this affair highlights the risk inherent in celebrity contracts, which depend on the constancy of a star’s talent and popularity.

“Sometimes, personally, they take a left turn or a right turn, which leaves their counterpart in a bind because the behavior they are exhibiting … doesn’t align with the values ​​of the host company,” Cohen said. “And this gets infinitely complicated.”

Nike – which ended up rehiring Vick in 2011, saying the athlete recognized his “past mistakes” in dogfighting – was recently faced with another dilemma in October after he Kyrie Irving tweeted a link to an anti-Semitic film and then refused to disavow it. The Oregon-based sneaker giant has finally cut ties with the NBA star and said it would not release the Kyrie 8.

In a statement to The Post, Nike said it was “prioritizing the donation and recycling of the Kyrie 8 product,” although it did not say how. Nike has a program that transforms what it deems to be unusable inventory into material for things like gym floors and even other shoes.

It’s unclear if Adidas has considered that option, but analysts said it would be a losing option. Adidas would only “gain some goodwill by donating a few basketball courts,” Powell said.

Regardless of what Adidas does, Powell said, “They are losing all the way – there are no winners in this case.”

(c) 2023, The Washington Post

Keep reading:

Adidas in trouble: they warn that it will have difficulties to pay its debt after breaking the contract with Kanye West

Adidas consummated its “divorce” with Kanye West: it will launch more Yeezys models but without the artist

Adidas canceled the contract with Kanye West: “We do not tolerate anti-Semitism or any other type of hate speech”