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Adidas’ Successful Sale of Yeezy Branded Apparel

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In a surprising turn of events, Adidas has managed to sell a staggering €350 million ($373 million) worth of Yeezy branded apparel in the third quarter. This comes after the shoemaker’s decision to cut ties with Kanye West, resulting in a flood of leftover inventory valued at €1.2 billion. Previously, investors were concerned about the firm’s ability to sell this surplus stock.

In a move that caught many off guard, Adidas announced in May that rather than burning or repurposing the remaining merchandise, it would continue selling Yeezy products. The company also pledged to donate an undisclosed portion of its profits to charity, including the Anti-Defamation League.

Adidas has now reported that their sales of leftover Yeezy stock in the third quarter alone generated a remarkable €150 million in profits. This figure adds to the €150 million they made from selling Yeezy products in the second quarter. Despite this achievement, Adidas’ shares experienced a 2% dip following the announcement.

It is important to note that over the past year, Adidas’ stock has risen by an impressive 36%, having previously plummeted due to the termination of their partnership with Kanye West in October last year.

Despite posting operating profits of €409 million, a decrease of 27.5% compared to the previous year, Adidas had to contend with €110 million in extraordinary expenses. These expenses were attributed to the launch of a strategic review and charitable donations made as part of their response to canceling the Yeezy collaboration.

Adidas has successfully capitalized on its remaining Yeezy inventory while also demonstrating their commitment to charitable causes. This achievement signifies a significant turnaround from initial concerns about their ability to address the aftermath of their partnership termination with Kanye West.

Adidas Revenues Drop as Yeezy Line and North American Sales Decline

The Bavarian sportswear company, Adidas, reported a 6% decrease in revenues, amounting to €5.99 billion. This decline was primarily attributed to lower sales from its Yeezy line and a 10% decrease in sales from its North American segment.

Adidas acknowledged that its North American sales were adversely affected by high levels of inventory in the region. Bjørn Gulden, the company’s CEO, who assumed his position in January of this year, projected that the impact of high inventories will persist in the business for some time.

However, the company did achieve better-than-expected progress in reducing its inventory levels by 23% compared to the previous year. Currently, Adidas holds €4.8 billion worth of unsold stock, including the Yeezy products.

On a positive note, Adidas experienced a 1% year-on-year growth in currency-neutral revenues. This growth was driven by higher sales in all regions outside of North America, with Latin America (+13%), Greater China (+6%), and the Asia Pacific (+7%) showing particularly strong performance.

Excluding the Yeezy line, Adidas witnessed a 2% year-on-year increase in currency-neutral sales. This growth was primarily driven by higher footwear sales, which offset lower apparel and accessories sales.

Despite the challenges faced by the company, RBC analysts led by Piral Dadhania expressed confidence in Adidas’ ability, under the leadership of new CEO Gulden, to successfully turn around the business in the face of an increasingly competitive market. They regarded Adidas’ brand equity as one of the strongest in the sector.

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