What do you do with an extra pair of sneakers? For ordinary folk, the obvious options would be to keep it, use it, give away or try to sell it for something. But when you’re a multibillion worth company and a leader in the world market, the fix will not be so easy. Add the matter of a whole stock of $1.3 billion and it becomes a conundrum.
That is precisely what Adidas faces now and the corporate heads are trying to solve. After a string of anti-semitic comments by Ye West (formerly known as Kanye) Adidas broke off their collaboration with the rapper. The once-fruitful partnership began in February 2015 when the first pair of Yeezy Boost 750 shoes dropped in the market. They added a new definition to sportswear and became a lucrative brand for Adidas.
The new CEO Bjorn Gulden, who took over his post in January is trying to diffuse the situation. He ruled out the easy option of burning the stock due to the massive environmental damage it would cause (that decision was also no doubt abetted by the $526 million losses it would incur). “Then you have another issue,” Gulden says. “People will say you cannot destroy it because it’s a sustainability issue, right?”
Adidas had another option of donating the proceeds to charity or donating the shoes to earthquake victims in Turkey and Syria. But it is not that straightforward, as CEO Gulden explains. Upon inquiry he admitted it was plausible but not possible.
‘’ The people that are saying send the shoes to Turkey or somewhere where people don’t have shoes or there has been a tragedy happening, I think you agree that these are not normal shoes,’’ he told analysts on a company earnings call. He added ‘’the value of the product is not the physical value of the ingredients. It’s a brand and merchandise that is sold at a high price.’’
Despite the fallout, the shoes are as popular as ever. According to John Mocadlo, CEO of US shoe chain Impossible Kicks, sales have risen by 30%. With 17 stores across 11 states, the retailer observed that sales rose sharply since ties were cut between the rapper and Adidas last October. The shoes now have acquired the status of a collectors’ item. Mr. Mocadlo says that a pair of Yeezy ‘’Zebra’’ shoes now sell for between $340 and $360, compared with around $260 four months ago. The retailer does not think there is a conflict in selling the goods. Despite their opposition for Ye West’s opinions, they ‘’just sell it because it’s a collector’s item and there’s very limited supply at this point.’’
At this point Adidas also faces the question of where next in the quest of generating brand heat. For the German giant the answer may lie in the classics, namely the Samba with silhouettes like the Gazelle and Spezial also in tow. The CEO is of the opinion that they are evergreen, as he remembers the Spezial from back when they were a handball shoe and also said to “look for the Gazelle”. Gulden also stated “We currently have maybe the hottest shoe in the market… and it’s the Adidas Samba”.
But the sportswear brand also cautioned that 2023 would be a transitional year. They stated that the split with Ye cost them $540 million in 2022’s final quarter. Now they are expecting their first operational loss in three decades estimated at $738 million. But the CEO reiterated that Adidas would be profitable in 2024. “I think the goal that we have is to do what damages us the least, and that we do something good,” Gulden says. “We can then start to build a profitable business again in 2024”.
