Adidas AG CEO Bjorn Gulden warned that future sales of Yeezy sneakers may have a smaller positive impact on the company’s earnings than the initial batch.
The first drop in May and June was full of the franchise’s highest-priced and most sought-after products, including the chunky Yeezy Boost 700, which previously sold with a price tag of $240 (R4,479), and the sleek Yeezy Boost 350 sneakers, which have retailed for $220 (R4,105).
Consumers scooped up the offerings, creating a $437m (R8.1bn) bump in second-quarter revenue, enabling the German company to raise its financial targets for the year.
Adidas terminated its Yeezy collaboration with the rapper and designer Kanye West, or Ye, in October after he made a string of anti-Semitic remarks. That left about €1.2bn (R24.7bn) worth of sneakers in limbo.
As Adidas begins working through the remaining 75% to 80% of its Yeezy inventory, the future payoffs may become less pronounced. That’s because the remaining mix of products includes more of the cheaper footwear, such as the Yeezy Slide sandal, which used to sell at $55 (R1,026). Adidas is now including wholesale partners in the Yeezy sales and will share part of the proceeds with them.
“The first drop, let’s put it this way, was the most attractive product,” and had the highest average price, Gulden said on a call with reporters Thursday.
In hindsight, Adidas probably could have sold many more Yeezy products in the first batch, Gulden acknowledged, but said he wasn’t quite sure ahead of time how much consumers would want the footwear given the furore over Ye.
The cost of making the stockpile of Yeezy sneakers was about €500m (R10.3bn), which Adidas said earlier this year might have to be written off. The first batch of Yeezy sales has reduced the potential write-off to €400m (R8.2bn).
Gulden declined to speculate whether the rest of the Yeezy inventory could be sold off in 2023, or if future sales could stretch into next year. Even if it all gets sold, the total revenue may wind up being more or less than the current projection of €1.2bn (R24.7bn), he added.
For now, Adidas has pledged to donate about €110m (R2.2bn) from its first batch of Yeezy sales to organisations working to combat discrimination and hate.
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