Adidas pledges to donate €110mn to charity from Yeezy sale

Adidas has pledged to donate €110mn to charity after a successful first sale of its remaining stock of Yeezy trainers, as the sportswear group unwinds its ill-fated partnership with Kanye West.

The German company terminated its highly profitable agreement with rapper West — now known as Ye — in October last year after he made antisemitic remarks.

In its second-quarter results on Thursday, Adidas said the first sale of its outstanding Yeezy shoes, generated €400mn in revenue and €150mn in operating profit.

The company had previously promised to donate a “significant amount” of the proceeds to charity. It has made an initial donation of €10mn already with a provision for another €100mn.

Chief executive Bjørn Gulden said the donations would be made to organisations fighting racism and antisemitism.

Adidas on Thursday gave a slightly more optimistic outlook for 2023 after overall sales in the second quarter, excluding currency swings, were flat year on year at €5.3bn. The potential full-year loss will also be smaller than previously guided, with chief financial officer Harm Ohlmeyer saying that, excluding the Yeezy sales, Adidas was a “break-even company”.

Gulden said the core business had done “slightly better than expected” in the second quarter. He also believed the allure of the Adidas brand would increase once “larger volumes of our hot sellers” such as Samba and Gazelle shoes were available in stores.

Shares in Adidas were up 1.8 per cent in midday trading on Thursday. The stock is up about 40 per cent so far this year over investors’ hopes that Gulden will be able to restructure the company, which in 2022 was hit hard by the sudden end of its highly profitable Yeezy brand, an exit from Russia and lockdowns and anti-western sentiment in China.

In the second quarter, sales in China were up 16 per cent while they fell by the same rate in North America, excluding Yeezy. In Europe, they declined by 1 per cent. Operating profit more than halved in the second quarter to €176mn, excluding Yeezy.

The Financial Times reported last week that demand for the trainers in the first sale in late May and early June exceeded the company’s most optimistic expectations. Gulden acknowledged on Thursday that selling the Yeezy stock “is of course also helping both our cash flow and general financial strength”.

He added that the company sold between 20 and 25 per cent of its remaining Yeezy inventory in late May and early June. A second batch will go on sale later this month. However, he warned that there was still uncertainty over what customers would buy and he declined to speculate on the level of any potential additional donation from future sales.

Adidas, a rival to Nike, still sits on unsold Yeezy sneakers with a book value of €400mn and a retail value of at least twice that much. Should Adidas be unable to sell this, it would have to write it off. However, Ohlmeyer said he was not concerned about the remaining inventory levels anymore, suggesting the risk of any big impairment has subsided.

In its second-quarter results, the company also revealed €70mn in one-off costs linked to a restructuring.