Adidas generated over $560 million in sales earlier this year by selling unsold Yeezy shoes, which were designed by rapper Kanye West. The move came after Adidas decided to end its partnership with West, who had made a series of racist and antisemitic comments. Despite the controversy, demand for the shoes remained high, with Adidas unable to fulfill all of the orders.
To address the fallout from West's remarks, Adidas had initially announced plans to donate some of the proceeds from the Yeezy sales to organizations fighting against racism and antisemitism. Now, it has been reported that the company intends to donate more than $9 million to five charities in the US and China.
The sale of the leftover Yeezy inventory has helped Adidas reduce its projected operating loss for 2023 from $775 million to $598.56 million. However, discontinuing West's brand cost Adidas significantly, resulting in a $440 million drop in sales in the first quarter of 2023 alone.
The decision to cut ties with West was a significant blow to the artist, as Adidas had been distributing his Yeezy brand since 2013 and played a significant role in his wealth. Forbes estimates that West's net worth has decreased by $1.5 billion, resulting in his removal from the list of the World's Billionaires.
Adidas shareholders have filed a class-action lawsuit against the company, alleging that it failed to disclose the potential harm that West's behavior could cause the brand. The lawsuit claims that Adidas either intentionally deceived investors or acted with reckless disregard for the truth.
Adidas' upcoming earnings report, scheduled for August 3, will provide more insight into the impact of the loss of the Yeezy partnership on the company's financial performance.
In conclusion, Adidas' decision to sell unsold Yeezy shoes following the end of its partnership with Kanye West has proven to be financially lucrative. Despite the controversy surrounding West's remarks, demand for the shoes remained strong. However, discontinuing the brand has had a significant negative impact on both Adidas' sales and West's personal wealth. The upcoming earnings report will shed more light on the long-term effects of this decision.