Bjorn Gulden, fashion brand Adidas’s new CEO, has recently spoken about the cost of terminating the brand’s sneaker contract with Ye, the artist formerly known as Kanye West.
The write-off of the Yeezy inventory comes at the heels of other problems for the sportswear brand, as Adidas is currently struggling to recuperate from the production slowdown caused by prolonged lockdowns in China last year.
Investors are also wary of inflation in Europe and the United States affecting consumer spending, despite subsiding recession concerns. Shareholders have thus been surprised that Adidas hasn’t tried alternate paths to writing off the inventory, such as repurposing the trainers.
Gulden, however, has discussed two scenarios, both of which result in massive losses for the brand. If Adidas fails to sell the Yeezy trainers the rapper designed, revenue is estimated to fall by 1.2 billion euros. But if Adidas decides to write off the Yeezy inventory altogether, it will lose another 500 million euros.
The sportswear brand ultimately expects to lose 700 million euros in operating costs this year.
Adidas already stated last year that cutting ties with Ye would shrink the brand’s net income by 250 million euros.
Commenters have postulated that, by revealing all pain points at once, Gulden has a chance to re-strategize the next steps for the sportswear brand.