Adidas results boosted by €504m in orders for unsold Yeezy stock

Adidas has been swamped with orders for unsold Yeezy stock racking up €504 million worth of orders for around 4 million pairs of shoes.

The sports giant announced in May that it would be selling off the stock after the termination of its agreement with Ye, AKA Kanye West, which was actioned after the musician and entrepreneur made antisemitic remarks.

The fire sale of stock exceeded all expectations and Adidas is said to have struggled to cope with orders and demand for specific styles and sizes, according to a report in the FT.

Yeezy had been a huge contributor to the success of Adidas and following the termination of the agreement, the company revealed it would face a black hole in its finances. The company said in Q1 that the loss of sales from Yeezy represented a drag of around £349 million (€400 million) year-on-year.

In May the company said that rather than destroy the unsold shoes, it would carry out a sell-off with a portion of the proceeds being given to charity. Those charities set to benefit include the Anti Defamation League and the Philonise and Keeta Floyd Institute for Social Change.

Additionally, the company intends to use some of the proceeds to pay royalties to Kanye West and cover costs associated with ending the partnership, including layoffs and legal expenses.

In its second quarter results released today the company said: "The company’s top- and bottom-line development in the quarter was positively impacted by the first sale of some of its Yeezy inventory."

During the quarter the company’s revenues declined 5% to €5.343 billion (2022: €5.596 billion). Gross margin was up 0.6 percentage points to 50.9% during the quarter (2022: 50.3%) while operating profit reached €176 million in Q2 (2022: €392 million), reflecting an operating margin of 3.3% (2022: 7.0%).

As a result the company has updated its full year guidance. Adidas now expects currency-neutral revenues to decline at a mid-single-digit rate in 2023 (previously: decline at a high- single-digit rate). At the same time, the company’s underlying operating profit – excluding any one-offs related to Yeezy and the ongoing strategic review – is still anticipated to be around the break-even level.

Including the positive impact from the first Yeezy drop, the potential write-off of the remaining Yeezy inventory of now € 400 million (previously: €500 million) and one-off costs related to the strategic review of up to €200 million (unchanged), the company now expects to report an operating loss of €450 million in 2023 (previously: loss of €700 million).

Adidas said that any future Yeezy drop would further improve the company’s results" if successful.