Adidas grapples with $1.3B in unsold Yeezy sneakers after breaking up with Kanye West

This is what happens when you put all your eggs in one basket case

The fall of Ye – the artist formerly known as Yeezus, Saint Pablo, Yeezy, Louis Vuitton Don, and Kanye West – was one of 2022's more eyebrow-raising stories. Now Adidas has been left one of the biggest losers because it is sitting on $1.3 billion worth of Yeezy sneakers made in collaboration with the rapper.

In a textbook example of putting all your eggs in one basket case, the German sportswear giant cut ties with West in October last year after a spate of increasingly strange – and racist – behavior.

This included wearing a "White Lives Matter" T-shirt at Paris Fashion Week where he was promoting his label, YZY (formerly Yeezy – yeah, the guy has problems with rebranding), and making a series of antisemitic remarks in interviews, culminating in the rapper announcing "death con 3 on JEWISH PEOPLE" on Twitter, which promptly banned him.

He was reinstated by Twitter 2.0 under Elon Musk in November, but that too turned out to be short-lived when he posted an image of a swastika inside the Star of David in December.

Adidas said that ending the relationship with West would cost it $246 million in profit for 2022. Meanwhile, Forbes reported that the partnership accounted for $1.5 billion of Kanye's net worth, which meant he'd be stripped of his billionaire status.

During an earnings call yesterday, Adidas had to face up to the mountains of stock left in the wake of the breakup. Bjørn Gulden, who was raised to CEO after the Wild West drama, said the company had a number of choices.

Destroying them would "raise sustainability issues," so that was out. Restitching them to hide the Yeezy brand "is not very honest, so it's not an option." Donating the kicks to earthquake-hit Syria or Turkey was also struck off because the product would "come back again very quickly" due to its high market value, Gulden said.

With the company no closer to a solution, the CEO promised "that the people that have been hurt by this will also get something good out of it and get donations and proceeds in different ways, shapes or forms."

But Adidas has more problems than a hoard of shoes it can no longer sell. Analysts reckon the Yeezy line comprised up to 15 percent of the company's net income, and the breakup itself cost more than $600 million in lost sales, leading to a net loss of more than $540 million for the year. Profit in Q4 2021 was around $225 million.

Adidas is now forecasting an operating loss in the region of $730 million for 2023. The last time Adidas reported an annual loss was 31 years ago.

If the company ended up selling the shoes, which Gulden claims "so many companies" are lining up to buy, Adidas would still have to pay royalties to West. He insisted that rumors that the business is in talks to sell them "are not true."

Throwing in the towel somewhat, Gulden described 2023 as "a transition year," after which "we can then start to build a profitable business again in 2024."

Kanye West has released 10 studio albums since his 2004 debut, The College Dropout, and won 24 Grammys out of 75 nominations, though The Register has always believed him to be hideously overrated. We were right.

Commentators suggest that his 2022 freakout could stem from a deterioration in mental health precipitated by his divorce from Kim Kardashian, with whom he has four children. That or it's an art project or publicity stunt, but considering the self-sabotage and damage to his career, who really knows. ®