By Matthew Hoffman
Adidas sells 419 million pairs of shoes a year. Since 2015, the most sought-after shoes have been the Yeezys, a collaboration between the German sporting goods giant and US rapper Kanye West (45).
Thanks to fantastic margins, the cooperation brought countless billions into the coffers of the company based in Herzogenaurach, Bavaria. But after anti-Semitic statements, Adidas separated from the musician in October 2022.
Now the brand faces a huge Yeezy problem: Because nobody knows what will happen to the shoes and clothes in the series.
KanyeWest Photo: Patricia Schlein/picture alliance
New boss Björn Gulden (57) cannot even rule out that the remainder of the collection (worth around 500 million euros) will have to be completely destroyed!
Regarding the possibilities, the editorial network Germany quotes the manager as follows: “We can destroy the goods or give them away or sell them and donate the proceeds.”
▶ If the company destroys the goods, Adidas has to write off half a billion euros. That is out of the question for reasons of sustainability, says Gulden.
▶ If Adidas still sells the products, you would have to pay Kanye West commissions. You don’t want to earn any more money that way, any possible proceeds should benefit those who were hurt by West’s statements.
▶ Giving away the shoes to the needy also creates problems, says Gulden.
The former professional soccer player (four appearances for 1. FC Nuremberg) came from competitor Puma, where he had the most successful year in the company’s history before moving. Adidas (almost 60,000 employees) is in crisis, the first loss in more than 30 years is imminent.
The job will be tough for Björn Gulden, who is combative: “You don’t change coaches when you’re a champion.”
Predecessor Kasper Rorsted had relied too much on the once highly profitable market in China, gained market share there – and ultimately suffered more than the competitors from the consequences of political regulation and Covid closures in the Middle Kingdom. In addition to the Yeezy problem, there is also the withdrawal from the Russian business.
Adidas is also sitting on billions of euros worth of unsold inventory beyond the Kanye West collection. The warehouses are full in the giant markets in China and the USA, among others. “The cure for stocks are discounts,” Gulden admits.
At least until the summer, there is a risk of a price war in the industry, which will put pressure on sales. The Adidas share listed in the Dax fell by around three percent on Wednesday.
The problems at the brand with the three stripes could push the operating result down by up to 700 million euros this year. “2023 will be a transition year to lay the foundation for 2024 and 2025,” says Gulden. Then he wants to attack again – especially with a focus on the brand. To this end, Adidas is reorganizing the management team around Gulden.