**Adidas Generates €400 Million from Yeezy Sneakers and Supports Anti-Hate Organizations**
Adidas, the German sportswear maker, earned 400 million euros ($437 million) from the initial release of Yeezy sneakers. These sneakers were left over after Adidas terminated its partnership with Kanye West, also known as Ye. The company’s goal is to sell off the unsold shoes and donate a portion of the proceeds to organizations fighting antisemitism and other forms of hate.
**Successful First Release Results in Operating Profit for Adidas**
The first batch of Yeezy sneakers, released in June, quickly sold out and helped Adidas achieve an operating profit of 176 million euros in the second quarter. This surpassed their initial expectations and indicated the popularity of the sneakers. As a result, a second sale started on Wednesday.
**Cutting Ties with Kanye West and Managing Unsold Inventory**
After Kanye West made antisemitic and offensive comments, Adidas decided to end its partnership with the rapper in October. However, this left the company with 1.2 billion euros worth of high-end shoes that needed to be disposed of responsibly.
CEO Bjørn Gulden expressed the company’s commitment to selling off the existing Yeezy inventory rather than destroying it. By doing so, Adidas can make significant donations to organizations like the Anti-Defamation League, the Philonise & Keeta Floyd Institute for Social Change, and Robert Kraft’s Foundation to Combat Antisemitism.
**Donations and Financial Impact**
Adidas has already donated 10 million euros to the aforementioned groups, with an expected additional donation of 100 million euros. Depending on future sales, further contributions may be made. These donations are viewed positively by Jewish civic leaders who see it as a way for the company to support anti-hate organizations.
The CEO of Adidas, Bjørn Gulden, stated that the Yeezy sales are not only benefiting the company’s cash flow but also its overall financial strength.
**Significant Results from First Sale, but Potential Challenges Ahead**
The first sale of Yeezy sneakers resulted in the sale of approximately 20% to 25% of the remaining inventory, contributing 150 million euros to Adidas’ operating earnings in the April-to-June quarter. Despite these positive results, Chief Financial Officer Harm Ohlmeyer cautioned that the Yeezy contribution was not as substantial as it seemed, as it did not include various costs incurred by the company.
Furthermore, Adidas warned that the success and price level of the initial sale may not reflect future releases. The company is uncertain whether subsequent releases will see similar demand and pricing.
**Navigating the Impact of Ending the Partnership with Kanye West**
Terminating the partnership with Kanye West put Adidas in a challenging position given the popularity of the Yeezy line. The company faced increasing pressure to sever ties with the rapper. Other companies had already cut off their relationships with Kanye West in response to his controversial statements.
The matter of the terminated contract is currently in arbitration and being handled by legal representatives from both sides. It is surrounded by uncertainty, according to CEO Bjørn Gulden.
Adidas has not explicitly stated whether it will pay royalties to Kanye West on the Yeezy sneakers. The company has only affirmed that it will honor all contractual obligations.
**Financial Outlook and Donations to Anti-Hate Groups**
Yeezy revenue from June was comparable to sales in the second quarter of the previous year. Consequently, Adidas has revised its operating loss projection for this year from 700 million euros to 450 million euros.
The donations to anti-hate groups are not based on a fixed percentage of sales. Adidas has engaged in discussions with the organizations to determine an appropriate amount to contribute.
In conclusion, Adidas has found success with the sale of Yeezy sneakers and plans to continue selling the remaining inventory. Simultaneously, the company is donating a portion of the proceeds to organizations combating antisemitism and other forms of hate. Despite the challenges posed by the termination of their partnership with Kanye West, Adidas remains committed to fulfilling its contractual obligations and maintaining its financial strength.
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