Adidas still hasn’t figured out what to do with its $1.3 billion stock of unsold Yeezy sneakers after cutting ties with rapper Kanye West over anti-Semitic remarks last year.
CEO Bjorn Gulden outlined the company’s costly dilemma during a call with analysts Wednesday — noting that the options available to Adidas, such as rebranding the sneakers or even literally burning the Yeezy inventory, all have major downsides.
“Depending on who you speak to, people will say you cannot destroy because it’s a sustainability issue, right? So, please don’t destroy.
“And then, those who are like, ‘Please don’t sell because you have a reputation issue,’” Gulden said during the earnings call.
“That’s why we haven’t made a decision on it, because it’s a very complicated issue,” Gulden added.
The Yeezy imprint was one of the most profitable segments of Adidas’ business until last year, when the brand hastily cut ties with West — who has legally changed his name to Ye — following a series of bizarre anti-Semitic tirades.
The German sports apparel giant warned that it will take a whopping $527.5 million hit to its earnings this fiscal year if it does not sell its remaining Yeezy apparel.
The messy breakup with West contributed to a dismal fourth-quarter result for Adidas, which posted a net loss of $540 million.
Gulden said Adidas would face “a lot of reputational risk” if it tries to rebrand and sell the Yeezy merchandise.
“The other side is to say we burn it or we do whatever it takes then to destroy it, and it disappears, then you have another issue,” he added.
Other options available to Adidas include selling the Yeezy inventory “at cost” — meaning the brand wouldn’t profit on the products — selling them at a small margin and donating the proceeds to charity.
Gulden also questioned the viability of simply donating the Yeezy sneakers to earthquake victims in Turkey or another worthy cause. He suggested the high-end products would end up on the resale market.
“If you did that, they will come back again because the value of the product is not the physical value of the ingredients, it is the premium because it’s a brand and the merchandise that is sold at a high price,” Gulden said.
The Adidas CEO said he has received “probably 500 different business proposals” from people who wanted to buy up the remaining Yeezy sneakers for resale.
Gulden did not provide a timetable for a final decision on the inventory.
“I think the goal that we have is to do what the probability is that it damages us the least and we do something good,” he added. “And that’s what we’re talking to many interested parties, people that have been hurt by this situation, and are discussing what they think is the best option.”