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The German sportswear company cut ties with Ye, formerly known as Kanye West, in October because of his repeated antisemitic comments.
The company immediately halted sales of products from the artist’s Yeezy line when it announced the split, but it’s yet to decide whether it’ll unload its remaining Yeezy merchandise or take a hit of 500 million euros, or $526 million, from not selling it, the company said when it reported earnings Wednesday.
Adidas also continues to expect to spend roughly $210 million this year on a strategic review of the business, in line with guidance the company released last month.
The decision to split with Ye punched a giant hole in Adidas’ top line. Yeezy accounted for $1.2 billion in sales for Adidas last year, according to Cowen.
Adidas on Wednesday also reported 22.5 billion euros, or $23.7 billion, in 2022 revenue – a 6% increase. Net income decreased 70% to $671 million.
In November, an Adidas executive said the company owns the designs it made in partnership with Ye and could continue to sell the products, noting the company intended to “make use of these rights as early as 2023.”
On a Wednesday call with reporters, Gulden said the company is working through various options for getting rid of the Yeezy inventory, including destroying it and selling it.
If the company sells the inventory, Gulden said some of the proceeds will be given to charitable groups. He also said the product, if sold, will be sold as is. It won’t be relabeled. Gulden said there’s no timeline for making the decision.
“It’s a very complicated thing,” Gulden said. “It’s one of the most difficult decisions that I’ve been part of.”
“As soon as we have enough facts that we can make a decision, we’ll make a decision,” he added.
Gulden joined Adidas as CEO on January 1 after previously serving in the same role at rival Puma, where he led a sales comeback and helped the brand collaborate with celebrities like Jay-Z, J.Cole, and Rihanna.
Regardless of what Gulden and Adidas decide to do with the remaining Yeezy inventory, it will likely be a challenging year. Adidas expects revenue, not including currency charges, to decline in the high single digits.
The company’s financial guidance assumes Adidas doesn’t sell the Yeezy inventory.
“2023 will be a transition year to build the base for 2024 and 2025,” Gulden said, in a news release. “We need to reduce inventories and lower discounts. We can then start to build a profitable business again in 2024. Adidas has all the ingredients to be successful. But we need to put our focus back on our core: product, consumers, retail partners, and athletes. We will work on strengthening our people and the Adidas culture.”
Gulden seemed to shoot down rumors of resigning Ye on the call on Wednesday, saying the Yeezy business is “now lost” and would need to be replaced with “many, many pieces.”
“There is no other Yeezy business in the market,” he said. “The closest thing is Jordan.”
