Adidas’ split with controversial rapper Kanye West continues to cause outsized financial struggles for the company, as it reported a fourth-quarter operating loss of $763 million and continues to prepare for a murky 2023.
On Wednesday, the Germany-based company warned that its first annual loss in more than three decades could be on the horizon, as its inability to come off of West’s popular Yeezy line has battered its earnings. Adidas’ CEO Bjorn Gulden called 2023 a “transition year” for the company and suggested that it could once again be profitable once it offloads the remaining Yeezy products.
“Adidas has all the ingredients to be successful. But we need to put our focus back on our core: product, consumers, retail partners, and athletes,” Gulden said in a statement Wednesday.
The company ended its partnership with West in October 2022, following a string of inflammatory antisemitic comments from the rapper. Jewish organizations, celebrities and politicians all called for the sportswear company to end its partnership with West, despite the Yeezy brand being among its top-selling products.
Now, the company is being forced to make a decision on the remaining Yeezy inventory it has in stock. At its height, the Yeezy brand promoted price tags for sneakers and apparel of up to $700 a pair, a novelty scale in the current market, leading experts to estimate more than $500 million in remaining inventory.
Adidas said in February that it stands to lose $1.3 billion in revenue this year if it couldn’t repurpose the merchandise. On Wednesday, Gulden said that the company has ruled out burning the sneakers, giving them away or rebranding them, according to Bloomberg News.
All of those options had been floated — but come with their own distinct drawbacks.
“There are so many people that have an interest in this from different communities from around the world,” Gulden said. “I’ve only been involved in this for seven weeks, and I don’t feel qualified to make a decision based on the facts I have.”
He did note that the company was open to the idea of selling the product and donating the profits to charity.
The looming future of unsold Yeezy merchandise is not the only problem weighing on Adidas however, as dull revenue from China and higher supply costs have also taken a toll, said the company.
Partnerships with celebrities like Beyonce and Pharrell have also failed to meet expectations, likely causing the recent shakeup among the company’s top sales and marketing executives.
