<h2 class="wp-block-heading" id="h-topline">TOPLINE</h2>



Adidas is considering writing off its remaining inventory of Yeezy merchandise, valued at $320 million by the company, chief executive Bjorn Gulden said Wednesday—as the German footwear firm separates from the brand designed by Kanye West, who lost his partnership with Adidas following a string of antisemitic remarks.



<h2 class="wp-block-heading">KEY FACTS</h2>



Gulden said Wednesday that a scenario in which the company writes off its Yeezy inventory is “financially the worst case,” according to the&nbsp;<a href="https://apnews.com/article/adidas-ye-kanye-west-antisemitism-df2df5a6489beba1a23ffefa6acc98c3" target="_blank" rel="noreferrer noopener">Associated Press</a>.



The company has sold hundreds of millions of dollars’ worth of leftover Yeezy shoes, and Gulden reportedly said “we of course hope we can do more drops next year and we can get more value out of it and donate the proceeds,” but no decision has been made.



Gulden also said the company had stored its Yeezy inventory in several locations and declined to say what the company would do if the inventory remained unsold.



Adidas included a possible write-off of the Yeezy inventory in its&nbsp;<a href="https://www.adidas-group.com/en/media/news-archive/press-releases/2023/adidas-reports-revenue-increase-in-the-third-quarter-underlying-b/" target="_blank" rel="noreferrer noopener">outlook</a>&nbsp;Wednesday for its earnings this year, suggesting in its full-year guidance that it expects about $106 million in operating losses this year after a previous prediction of a $481 million loss.



Shares for&nbsp;<a href="https://finance.yahoo.com/quote/ADDYY" target="_blank" rel="noreferrer noopener">Adidas</a>&nbsp;fell slightly (2%) to $90.46 after the company released its third-quarter earnings&nbsp;<a href="https://www.adidas-group.com/en/media/news-archive/press-releases/2023/adidas-reports-revenue-increase-in-the-third-quarter-underlying-b/" target="_blank" rel="noreferrer noopener">report</a>.



Adidas reported a 6% increase in footwear revenue year-over-year and a 6% decline in apparel sales, while the company’s revenue declined 6% to $6.4 billion.



<h2 class="wp-block-heading">BIG NUMBER</h2>



$374.7 million. That’s how much revenue Adidas generated from Yeezy sales through the third quarter. Yeezy merchandise generated about <a href="https://www.forbes.com/sites/siladityaray/2023/08/03/adidas-sold-437-million-worth-of-yeezys-in-second-quarter-of-2023/?sh=36ab3bd526f4">$437 million</a> in revenue in the second quarter, which Adidas said was in line with Yeezy sales during the same quarter last year. The company generated $1.28 billion from Yeezy sales through all of last year.



<h2 class="wp-block-heading">KEY BACKGROUND</h2>



Adidas ended its partnership with West last year after the rapper made a series of antisemitic comments on social media. The company announced earlier this year it would start selling some of its remaining Yeezy inventory—valued then at $1.28 billion—and donate a “significant amount” of sales to organizations combating racism and antisemitism. Adidas&nbsp;<a href="https://www.forbes.com/sites/siladityaray/2023/08/03/adidas-sold-437-million-worth-of-yeezys-in-second-quarter-of-2023/?sh=1f97832526f4">previously</a>&nbsp;explored a write-off of its remaining Yeezy inventory in August, which the sportswear firm estimated the write-off would cost the company an additional $437 million. Adidas similarly estimated its “discontinuation of the regular Yeezy business” cost the company about $437 million in the first half of 2023. A write-off would reduce the value of the brand in Adidas’s financial statements.



<h2 class="wp-block-heading">FURTHER READING</h2>



<a href="https://www.forbes.com/sites/antoniopequenoiv/2023/10/17/adidas-cuts-projected-losses-by-over-300-million-after-selling-yeezy-shoes/?sh=1e34b8baab0a">Adidas Cuts Projected Losses By Over $300 Million After Selling Yeezy Shoes</a>&nbsp;(Forbes)

Street Style – Paris Fashion Week – Menswear Spring/Summer 2024 : Day Six

Adidas Could Write Off Value Of Unsold Yeezy Inventory—Worth $320 Million

The Ye Effect may be the new Oprah Effect: This morning Kanye West’s fashion and shoe company Yeezy and clothing retailer Gap&nbsp;<a href="https://www.forbes.com/companies/gap" target="_blank" rel="noreferrer noopener">GPS</a>&nbsp;announced a ten-year partnership for a Yeezy Gap clothing line.&nbsp;



Yeezy Gap will hit stores next year with a line of “modern, elevated basics for men, women and kids at accessible price points,” according to a statement from both partners announcing the news. West will receive an undisclosed percentage of royalties and, potentially, an equity stake, dependent on sales achievements.



Shares of Gap, which has struggled over the past five years to keep up with fast fashion retailers, surged nearly 40% when markets opened Friday morning in response to the news, but then tapered off. As of shortly after 1:50 pm ET, the stock was trading at $12.50, up 22% from Thursday’s close. The deal is welcome news for the retailer, whose namesake brand has lost its iconic status, and, <a rel="noreferrer noopener" href="https://www.sec.gov/ix?doc=/Archives/edgar/data/39911/000003991120000069/q1202010-qdocument.htm" target="_blank">as of earlier this month</a>, had cash flow of negative $1.1 billion compared to negative $136 million last year.



“Gap has been a challenge for us,” Gap CEO Sonia Syngal&nbsp;<a href="https://www.forbes.com/sites/andriacheng/2020/06/04/another-sign-gap-brand-is-losing-its-relevance-and-dont-blame-it-on-coronavirus/#153b5fd12645">said on a conference call</a>&nbsp;earlier this month, adding that “years of inconsistent execution have depleted brand health.” Other brands under the Gap umbrella include Banana Republic, Old Navy and Athleta.



Years ago, West, who worked at a Gap store in Chicago as a teenager, expressed interest in partnering with the brand, whose product is quite different from his pricey Yeezy high-fashion line that sells shoes for more than $1,000 a pair and $925 cardigans.



“I’d like to be the Steve Jobs of the Gap,” he said in a&nbsp;<a href="https://www.thecut.com/2015/02/kanye-sees-himself-as-the-robin-hood-of-fashion.html" target="_blank" rel="noreferrer noopener">2015 interview</a>&nbsp;on the now defunct Style.com. “I’m not talking about a capsule. I’m talking about full Hedi Slimane creative control of the Gap.”



But last year the rapper and designer, who is known to often change course,&nbsp;<a href="https://www.forbes.com/sites/zackomalleygreenburg/2019/07/09/kanyes-second-coming-inside-the-billion-dollar-yeezy-empire/#273fd54d5ec3">told&nbsp;</a><a href="https://www.forbes.com/sites/zackomalleygreenburg/2019/07/09/kanyes-second-coming-inside-the-billion-dollar-yeezy-empire/#273fd54d5ec3">Forbes</a>that&nbsp; “What makes celebrity products sell so well is scarcity. &#8230; So if they make it too broadly available, I think it crashes the business model.”



That said, the Yeezy clothing line wasn’t selling “so well.” While his deal with Adidas to sell Yeezy shoes makes up&nbsp;<a href="https://www.forbes.com/sites/zackomalleygreenburg/2020/04/24/kanye-west-is-now-officially-a-billionaireand-he-really-wants-the-world-to-know/#4111f4c87b9e">the bulk of his $1.3 billion fortune</a>—Forbes&nbsp;estimates that his stake of the partnership is worth $1.26 billion—the Yeezy fashion line has struggled. His high-fashion line, meanwhile, is nothing more than a rounding error when it comes to his net worth.&nbsp;



Partnering with a celebrity has been good—at least initially—for the stock of other companies.&nbsp; When Oprah Winfrey announced she was partnering with and investing in WW (then Weight Watchers) in 2015, its stock&nbsp;<a href="http://forbes.com/sites/laurengensler/2015/10/19/weight-watchers-oprah-winfrey/#e5073c6c6c68" target="_blank" rel="noreferrer noopener">surged 92%</a>. Earlier this month, shares of the beauty giant Coty&nbsp;<a href="https://www.forbes.com/companies/coty-inc" target="_blank" rel="noreferrer noopener">COTY</a>&nbsp;<a href="https://www.marketwatch.com/story/coty-stock-jumps-after-possible-collaboration-with-kim-kardashian-announced-2020-06-03#:~:text=COTY%2C%20%2D6.88%25%20shares%20jumped,line%20is%20called%20Kylie%20Cosmetics." target="_blank" rel="noreferrer noopener">rose 7%</a>&nbsp;when it announced that it was potentially pursuing a partnership with West’s wife, Kim Kardashian West.



&nbsp;It’s too early to say whether West’s Yeezy line can&nbsp; help turn Gap around for good, but it will be another chance for him to do what he loves.



“I am a product guy at my core,” West told <a href="https://www.forbes.com/sites/zackomalleygreenburg/2019/07/09/kanyes-second-coming-inside-the-billion-dollar-yeezy-empire/#2d4d7a4b5ec3">Forbes last year</a>. “To make products that make people feel an immense amount of joy and solve issues and problems in their life, that’s the problem-solving that I love to do.”



&#8211;<a href="https://www.forbes.com/sites/maddieberg/">Madeline Berg</a>, Forbes Staff, <a href="https://www.forbes.com/hollywood-entertainment">Hollywood &amp; Entertainment</a>

Tag: Yeezy clothing

FORBES AFRICA SOCIAL MEDIA

Adidas Could Write Off Value Of Unsold Yeezy Inventory—Worth $320 Million

Gap Stock Surges After Kanye West Signs Deal To Sell A New Yeezy Clothing Line With Struggling Retailer