Adidas Would Pay Royalties to Kanye West in Case of Yeezy Selloff, CEO Says
March 08 2023 - 7:14AM
Dow Jones News
By Joshua Kirby
Adidas AG will continue to make royalty payments to designer and
musician Kanye West if it decides to sell its remaining Yeezy
sneakers, Chief Executive Officer Bjorn Gulden said, as the
sportswear giant continues to consider its options for the
high-value leftover inventory.
Mr. Gulden said the group hasn't yet reached a decision on what
to do with remaining Yeezy sneakers produced before its split last
year with Mr. West, who goes by Ye.
Germany's Adidas previously said writing off the inventory would
result in a hit to operating earnings of around 500 million euros
($527.4 million) this year, adding to the loss of some EUR600
million in revenue booked in the last three months of 2022.
Adidas in October ended its collaboration with Ye, under which
it produced his popular and lucrative Yeezy line, following a
series of controversies including antisemitic comments made by the
rapper.
But writing off the stock could raise sustainability as well as
financial concerns, Mr. Gulden said in a conference call following
the group's 2022 update. Destroying the sneakers by burning them
would be an environmental problem, he said. Yeezy's strong brand
appeal meanwhile make the products much more valuable than their
material components, he said.
This complicates suggestions for the footwear to be donated to,
for example, the victims of the recent earthquake in Turkey and
Syria, Mr. Gulden said.
If Adidas decides instead to sell the remaining Yeezys, it would
be obliged to continue to pay royalties to Ye, Mr. Gulden said.
Adidas would be unlikely to make any profit in that eventuality, he
said, but would look to cover its costs, which include logistics
expenses as well as payments to Ye.
Selling the sneakers under a different branding and label is not
an option, he said.
"We are a company that holds true to contracts," finance chief
Harm Ohlmeyer added.
Donations could also be made from sales to groups affected by
Ye's comments, Mr. Gulden said, adding however that the company's
isn't currently in negotiations over a potential sale of the
inventory.
Adidas previously said it expects to reach underlying breakeven,
roughly, in its 2023 operating result. The guided operating loss of
EUR700 million includes EUR200 million in one-off costs relating to
a strategic turnaround after last year's travails, Mr. Ohlmeyer
said, as well as the hit from a potential Yeezy writeoff.
Write to Joshua Kirby at joshua.kirby@wsj.com;
@joshualeokirby
(END) Dow Jones Newswires
March 08, 2023 06:59 ET (11:59 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
Adidas (QX) (USOTC:ADDYY)
Historical Stock Chart
From May 2024 to Jun 2024
Adidas (QX) (USOTC:ADDYY)
Historical Stock Chart
From Jun 2023 to Jun 2024