Triple-striped sportswear group Adidas isn’t looking terribly clever right now. The German shoemaker has warned that it is sitting on a €1.2 billion pile of unsold stock after belatedly terminating its once-trumpeted deal with rapper Ye, the artist formerly known as Kanye West.
Adidas did its brand no favours last autumn by trying to cling on to its lucrative design partnership with Ye weeks after he made a series of anti-Semitic and racist remarks. The eventual severing of ties has now left it with another problem: in a worst-case scenario, if it has to write off all existing Yeezy inventory, it faces an operating loss of as much as €700 million in 2023. Understandably, shareholders have not taken too kindly to this news.
The dilemma facing new chief executive Bjorn Gulden is whether to try to get rid of existing Yeezy shoes – which once shifted for hundreds of euro – at knock-down prices or relaunch and repurpose them as unbranded products, also with lower price tags. Environmentalists will lambast the company if it simply sends them to landfill, and at least some Yeezy shoes, including its line of foam runners, are made of recyclable materials anyway.
According to Adidas, the Yeezy inventory would have brought in €1.2 billion of revenue and €500 million of operating profit had things turned out differently and Ye hadn’t destroyed what was left of his reputation.
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It clearly felt its deal was a gamble worth taking. And yet it was always a gamble, even at the peak of its success. The collaboration, the biggest Adidas has ever done with someone who isn’t an athlete, came wrapped in risk given West has long been prone to erratic behaviour. He wasn’t entirely happy with his relationship with Adidas either and had previously signalled that he didn’t intend to renew the deal once it expired in 2026.
So does this mean fashion brands should give up their pursuit of celebrities? You only have to look at the good fortunes of foam pioneers Crocs to conclude that the answer is absolutely not.
The US footwear company’s clogs were not traditionally considered cool. But the brand’s eclectic range of well-known “fans” has yielded a drip-feed of exposure, while limited edition collaborations with music stars Justin Bieber and Post Malone haven’t done any harm. This week, Crocs reported record annual revenues of $3.6 billion (€3.37 billion), up 54 per cent, after a bumper finish to 2022.
The lesson of Crocs is that celebrity and influencer marketing works. The lesson of Adidas and Yeezy is that it is wise not to be over-reliant on any single partnership: Ye is not the first star to fall from grace, and he won’t be the last.
