Adidas will sell “some” of the unsold stock from its since-terminated Yeezy partnership with rapper Kanye West (now Ye) and donate proceeds. “What we are trying to do now over time is to sell some of this merchandise,” Chief Executive Officer Bjoern Gulden said on Thursday, noting that “burning the goods would not be a solution.” It is unclear how much of the reported 1.2 billion euros ($1.3 billion) in unsold Yeezy wares will be sold off by the German sportswear giant and in what fashion; Gulden stated that the company is still working out the logistics of how (and presumably when) to offload the merch, a move that could enable adidas to chip away some of the damage to its bottom line seven months after terminating the deal with Ye.
And speaking of Ye, Reuters reported on Thursday that if/when the Yeezy goods are sold off by adidas, Ye “will be entitled to previously-agreed commissions – 15 percent of turnover.” In furtherance of the once-lucrative deal, which the parties first entered into in 2013 and expanded in 2016, Ye licensed the Yeezy trademark to adidas – which was responsible for making/selling Yeezy-branded goods – in exchange for a 15 percent cut of sales generated from the Yeezy branded offerings.
The fallout from the termination of the Yeezy partnership – which very publicly went south in the fall of 2022 when Ye began making overtly anti-Semitic and other racially offensive remarks in public – has been significant, with no small issue for adidas centering on what to do with the unsold merchandise. Adidas has also undoubtedly faced questions internally about what to do in light of its enduring ownership of the popular Yeezy designs, which have, according to reports, enjoyed continued demand in the resale market. In terms of the products/designs, adidas gained ownership of them as part of the deal, with copyright and patent registrations for the hot-selling footwear issued to – and maintained by – adidas. The company is listed as the owner of design patents for the Yeezy Boost, for example. Adidas also has rights in certain trademarks tied to the Yeezy wares, such as the SPLY-350 mark – but not for others, such as those related to Yeezy or Ye, himself.
Not the only looming issues being faced by adidas, the sportswear is embroiled in at least a couple of legal proceedings stemming from the now-defunct partnership, which was slated to run until 2026. Primarily, adidas initiated a lawsuit in Germany, seeking damages from Ye in connection with the termination of the deal. Adidas’ Chief Financial Officer Harm Ohlmeyer confirmed on Thursday that the case is still underway and “no financial sum has been determined yet.”
Meanwhile, in the U.S., in addition to facing pressure from key investor Union Investment to disclose information about its investigation into the fall out with Ye, adidas recently landed on the receiving end of a proposed class action complaint. Adidas stockholders named the company, its former CEO Kasper Rorsted, and Mr. Ohlmeyer in a securities fraud complaint, accusing them of “misrepresent[ing] and fail[ing] to disclose … adverse facts pertaining to the company’s business,” namely, the risks associated with its once-very-lucrative Yeezy deal with Ye, thereby, inflating adidas’ stock price. The pool of prospective plaintiffs in that case extends to individuals who purchased or otherwise acquired adidas securities between May 3, 2018, and February 21, 2023.
After months of uncertainty, Gulden confirmed in a Q1 conference call last week that the company was “getting closer and closer to making a decision” on what to do with the sneakers and the “options [were] narrowing.” He cited the sheer number of “interested parties” involved in the discussions as part of the difficulty. He did not reveal at the time how many pairs of Yeezy shoes that the company has on hand “because then the consumer would know how many we have and that could have an impact on demand,” but did confirm that adidas was “trying to avoid” destruction of the unsold goods.
He further asserted that the loss of the Yeezy brand, which once drove an estimated 4 to 8 percent of adidas’ annual revenue, is “of course hurting us.”
UPDATED (May 22, 2023): Adidas has confirmed that it “will begin selling some of the remaining inventory of adidas YEEZY products, with an initial release end of May 2023.” The sportswear giant further stated, “A range of existing designs will be available exclusively through adidas.com/yeezy and the adidas CONFIRMED app. A significant amount will be donated to selected organizations working to combat discrimination and hate, including racism and antisemitism. These include but are not limited to the Anti-Defamation League and the Philonise & Keeta Floyd Institute for Social Change.”
This article was initially published on May 11, 2023.