Adidas will sell off its remaining Yeezy inventory at cost rather than write it off at a loss, the company announced alongside its preliminary results for 2023.
The move isn’t entirely unexpected — in 2023, the company issued releases of Yeezy stock in May and July. Products in those two releases were sold at a profit, but a “significant amount” of the proceeds were slated to be donated to organizations that fight discrimination and hate.
The sports brand has been in a bind since ending its relationship with Ye (formerly known as Kanye West) in 2022 following a series of antisemitic remarks made by the rapper. Until the rupture, the Yeezy brand collaboration was a massive hit for Adidas, and the end of the relationship left Adidas with millions of shoes in storage that continue to weigh down its bottom line.
The decision to sell the remaining Yeezy stock rather than write it off will benefit the company’s 2024 fiscal performance. Adidas anticipates the 2024 release to generate sales of €250 million. The two previous Yeezy drops positively impacted net sales in the amount of approximately €750 million in 2023.
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For the full year 2023, Adidas reported better-than-expected although still not stellar results, with currency-neutral revenues for the year flat from 2022 where guidance had predicted a low-single-digit decline. The company attributed the continued slow sales to reduced wholesale sell-in as it worked to right-size its inventory levels as well as the discontinuation of the Yeezy business. Even though the two post-partnership Yeezy releases in 2023 brought in €750 million, that’s significantly less than the €1.2 billion the partnership garnered in 2022 when it was still active.
Operating profit in 2023 landed at €268 million compared to €669 million in 2022. This is again better than was expected, with guidance predicting an operating loss in 2023 of €100 million. A big driver of this outperformance was the decision to sell the Yeezy stock rather than write it off, although the company also noted that it saw better than expected operational performance in Q4 as well. The sale of the final Yeezy stock won’t have the same effect in 2024 though since this last round of inventory is being sold at cost.
As it finally puts the inflammatory Yeezy partnership behind it, the company continues to focus on its ongoing transformation, said CEO Bjørn Gulden: “We have better products in the market with improved sell-throughs; we have increased our visibility by investing again in more teams and athletes; we have successfully launched our new Originals campaign; we feel we have improved our relationship with our retail partners; and we have reduced our inventories substantially,” Gulden said in a statement. “We do of course know that our financial performance is not good, but we are on the way to making Adidas a good company again. As we said from the beginning, we just need the time to solidly build it up again. This year is the next building block needed to bring Adidas back to being a company with double-digit growth and 10% operating margin.”
