Adidas issued its first quarter earnings report early Friday and gave an update on what it plans to do with its now-defunct Yeezy footwear line.
The demise of the Yeezy line, following Kanye West’s controversial comments, continues to weigh on the company, where it saw a 20% sales decline in North America, according to CEO Bjørn Gulden.
“The decline in Lifestyle and the loss of Yeezy are of course hurting us,” Gulden said in a press release.
“Q1 ended a little better than we had expected with flattish sales and a small operating profit of € 60 million. Sales growth excluding Yeezy was 9%.”
The discontinuation of the Yeezy line represented a sales decline of around $441 million year-over-year, he said.
The sportswear CEO said that Adidas’ direct-to-consumer revenues fell 7% year-over-year, “as the vast majority of this product used to be sold through Adidas’ own online channel.”
As Adidas grapples with what to do with its Yeezy inventory, he concedes that 2023 is a transition year for the company.
“We just need some time. 2023 will be a bumpy year with disappointing numbers, where maximizing our short-term financial results is not our goal.”
“The company continues to review future options for the utilization of its Yeezy inventory,” Gulden said.
“Should the company irrevocably decide not to repurpose any of the existing Yeezy product going forward, this would result in the potential write-off of the existing Yeezy inventory and would lower the company’s operating profit by an additional € 500 million this year,” he added.
Since the discontinuation of Yeezy, the value of the shoes has remained steady on secondary marketplaces, StockX and GOAT.
If Adidas decides to sell off its existing stock, U.S. Director for Combating Antisemitism at the American Jewish Committee Holly Huffnagle said the proceeds should be funneled to efforts that fight antisemitism.
“The challenge is if these shoes are going to be out there and be worn by people, we must ensure that the antisemitic messaging of the shoes’ creator doesn’t spread,” Huffnagle told Reuters.
Last month, the reported value of unsold Yeezy inventory stood at $1.3 billion, per the New York Times.
