Not selling Yeezy apparel and shoes linked to Kanye West would cost Adidas 1.2 billion euros ($1.3 billion) in lost revenue

Herzogenaurach (Germany) (AFP) - Adidas said Wednesday it was still weighing what to do with its huge inventory of Kanye West’s Yeezy products after it ended its partnership with the controversial rapper.

Potentially not selling the apparel and shoes linked to West would lead to a revenue loss of 1.2 billion euros ($1.3 billion), the group said, announcing its 2022 full-year results.

Adidas halted its tie-up with West – now known formally as Ye – in October after he made a series of anti-Semitic outbursts.

As a result, the group ended production of the highly successful Yeezy line designed together with West.

“Should the company irrevocably decide not to repurpose any of the existing Yeezy product going forward,” it would have to write-off the entire inventory, it said.

That would lower the company’s operating profit by an additional 500 million euros in 2023, it said.

Along with one-off costs projected to reach 200 million euros related to a company strategic review, Adidas said it could end up with an operating loss of 700 million euros in 2023.

Bjorn Gulden, the group’s new chief executive, said the company will use 2023 as a “transition year to build the base for 2024 and 2025”.

“We need to reduce inventories and lower discounts. We can then start to build a profitable business again in 2024,” he said.

Next year was shaping up to be a key one for sporting apparel companies, with both the European football championships and the Olympic Games taking place.

Adidas on Wednesday also said net profit fell heavily by 83 percent to 254 million euros in 2022, confirming preliminary results released in February.

Besides its woes over the Yeezy line, it was also facing “elevated recession risks in Europe and North America as well as uncertainty around the recovery in Greater China”.

“The company’s revenue development will also be impacted by the initiatives to significantly reduce high inventory levels,” it added.