Last October Adidas severed their relationship with Ye, following the latter's antisemitic remarks. Now the footwear giant has released a profit warning revealing the price of the split: Without Ye's considerable marketing clout, Adidas' revenues for 2023 are expected to be down by roughly €1.2 billion (USD $1.3 billion), with operating profits down by €500 million (USD $536 million).
And that's if the company figures out a way to repurpose the mountain of unsellable Yeezy inventory they're sitting on. If they don't, "the write-off of the existing Yeezy inventory…would lower the company's operating profit by an additional €500 million this year," the company reports, acknowledging the "significant adverse impact from not selling the existing stock."
So what can they do with the unsold Yeezy gear? The company has a couple of choices, none of them good:
Option One is to unpackage every pair of Yeezys, remove the Yeezy tags, add new non-Yeezy tags, repackage them in non-Yeezy boxes, then try to sell those. But "it's very costly to go through this process," footwear retail analyst Matt Powell told NPR. "All of this work is extremely labor intensive and it can only be done one shoe at a time."
Then there are questions of whether people will buy Yeezys that have been stripped of their identity, and if the company would suffer reputational damage by marking formerly valued goods down. To avoid the latter, they could try to sell the retagged Yeezys in smaller markets, a common practice—ever see current photos of developing nations, where people are somehow wearing shirts celebrating the 2012 Super Bowl?—but this is unlikely to produce a windfall.
Option Two is to destroy the existing Yeezy inventory, to avoid the reputational damage that discounting your own stuff brings, and at least clear the warehouse space. This is a sad but common practice among luxury brands, who would rather burn their unsold handbags than let consumers see them going for 50% off. But these days environmental activists target those companies and blanket them with a different kind of reputational stink.
Footwear designers among you, do you have any ideas? How the heck do you repurpose a Yeezy Foam Runner, profitably?
I can't see any loss-reducing way out for Adidas. I think the best they can do is try to harvest some further good will, maybe by donating the gear to people in need. I guess the question is whether refugees or people in need of disaster relief would appreciate a pair of shoes covered in holes.
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