Should Adidas sell, destroy or donate Yeezy sneakers?

Adidas’ move last October to cut ties with Kanye West, now known as Ye, has left it with more than $400 million in the controversial rapper’s Yeezy brand’s footwear and a series of “very complicated” choices in how to make the inventory disappear.

On the one extreme, Adidas could sell the product in a “normal” fashion. However, Bjørn Gulden, Adidas’ new CEO, said Wednesday on the company’s quarterly analyst call that it could lead to reputational risks since Adidas cut ties with Ye following antisemitic comments.

At the other extreme, Adidas could burn or otherwise destroy the product, raising “sustainability issues.” Burberry, Urban Outfitters, H&M, Nike and Victoria’s Secret have been criticized for destroying goods as a clearance method.

“Between that, of course, there are different solutions,” said Mr. Gulden. “We could sell it with a small margin and give the margin away for different donations. We can sell them with more margin and give more donations.”

If the products were sold instead of being destroyed, Ye would be entitled to a portion of the proceeds under his royalty agreement. Adidas, however, would not profit, Mr. Gulden told reporters. He said Adidas is not considering rebranding the Yeezy inventory.

A third option is donating the product, although Mr. Gulden noted that the donated Yeezy styles would likely find their way to the resale market. Before Ye’s antisemitic tirades, the sneakers sold for between $200 and $600 each.

The goal, said Mr. Gulden, is to pick an option that “damages us the least” and “we use to do something good.”

The terminated Yeezy contract is expected to reduce Adidas’s revenues by €1.2 billion in 2023 and cause a loss of anywhere from €500 million to €1 billion, depending on whether the remaining inventory can be repurposed.

Some Jewish leaders, in interviews with The New York Times, saw value in donations to combat antisemitism arriving via Yeezy sales, but others were wary of the message sent should Yeezy products return. Charlotte Knobloch, president of the Jewish Community of Munich and Upper Bavaria, told the Times, “Yeezy products would end up on the streets as if nothing had happened.”

• Adidas results in 2022 reflect geopolitical, macroeconomic, and company-specific challenges –Adidas

• Adidas AG (ADDYY) Q4 2022 Earnings Call Transcript –Seeking Alpha

• Adidas has $500 million worth of Kanye West sneakers and no good options –The Washington Post

• Adidas Is Wondering What to Do With $1.3 Billion in Yeezy Sneakers – The New York Times

• Adidas warns dropping Kanye West could cost it more than $1 billion –NBC News

• Adidas could ‘literally burn’ $500M in unsold ‘Yeezy’ apparel: report –New York Post

• Amazon isn't alone in reportedly destroying unsold goods. –Business Insider

• Why fashion brands destroy billions’ worth of their own merchandise every year –Vox