ADIDAS WILL OWE YE ROYALTIES WITH YEEZY INVENTORY UNLOADING
Source: Adidas
Adidas announced on their official website that they plan to sell the remaining inventory of YEEZY merchandise starting at an initial release date of May 31st. The company will release these existing designs strictly through their own website and app. They also pledged to donate “a significant amount” of the profits to organizations combatting hate and discrimination. What they fail to mention in the article is that they likely owe Kanye West a portion of the profits.
Adidas CEO, Bjørn Gulden said, “After careful consideration, we have decided to begin releasing some of the remaining adidas YEEZY products. Selling and donating was the preferred option among all organizations and stakeholders we spoke to. We believe this is the best solution as it respects the created designs and produced shoes, it works for our people, resolves an inventory problem, and will have a positive impact in our communities. There is no place in sport or society for hate of any kind and we remain committed to fighting against it.”
In October of 2022, Adidas announced that they would be cutting ties with Kanye West and the YEEZY partnership following the antisemitic remarks made by the rapper. During this initial announcement, the brand calculated it would take a $246 million loss for the decision. Adidas took on the burden of the termination by continuing to fulfill any existing production orders to ensure their supply chain partners would not face negative repercussions from the decision.
Since then, the company released a statement in March that for the first time in 31 years, the brand is projecting an annual loss. In 2023 they are expecting an operating loss of over $700 million, this time announcing a new statistic of YEEZY inventory making up potentially over $500 million of this hit.
While at first glance it seems that this move could solve some of the company's financial issues, Adidas is firm on its stance to donate "significant amounts" of the profits to charity. In their official statement they explained that the decision “has no immediate impact on the company’s current financial guidance for 2023”.
Interestingly, Adidas avoided mentioning royalty payments they might owe to Kanye West for selling the remaining inventory in their recent announcement. However, in an interview with MarketWatch in March, Gulden explained that "If Adidas decides instead to sell the remaining Yeezys, it would be obliged to continue to pay royalties to Ye". It is unlikely that anything has changed with that obligation, so it seems like the company chose to abstain from addressing it in the announcement.
Instead, Adidas chose to focus on the positives of the deal, going into some detail about the charities they would be donating to. They mentioned specifically donating to Anti-Defamation League (ADL) and the Philonise & Keeta Floyd Institute for Social Change, with the plans to support the latter by working together to drive community programs for sport and education.
There is no set timeline for the release of all the inventory as the release states that only some of the merchandise will go on sale at the end of the month, with more inventory likely coming later. Kanye West has yet to respond to the decision, likely because he deactivated his very vocal Instagram account in April.