by 
Adidas would rather sell its remaining stock of Yeezy shoes than destroy them, CEO Bjørn Gulden said at the company’s annual meeting on Thursday, ending months of speculation over a pile of unsold stock valued at an estimated €1.2 billion ($1.3 billion). ). ).
When and how the sneakers will be sold is still to be determined, but “burning the shoes is not an option,” Gulden said at a controversial meeting where many shareholders expressed their frustration with how the brand is dealing with its ill-fated partnership with Ye, the rapper formerly known as Kanye West. Part of the proceeds will be donated to charity.
In October, Adidas was forced to sever ties with Ye amid mounting public and domestic pressure after the rapper made a series of anti-Semitic comments. The following month, the company received an anonymous letter from former employees accusing Ye of harassment and misconduct while working for the brand. In April, a group of investors filed a class-action lawsuit against the German sportswear giant, alleging the company knew about the risks of partnering with Ye years before his inflammatory comments went public. The lawsuit names former CEO Kasper Rørsted and current CFO Harm Ohlmeyer among the defendants.
At Thursday’s meeting, Gulden and his executive team announced that an independent investigation into Ye’s alleged misconduct in the workplace failed to substantiate claims that he harassed female employees and showed pornographic material to staff members – a result that drew quiet sighs from investors during the live-streamed event.
“The allegations are not accurate, [legal] revenue is still in its early stages and we will defend ourselves against these accusations,” said Gulden, who declined to comment further on the matter.
At the meeting, some shareholders also criticized Adidas for allegedly failing to protect garment workers and pay fair wages at some factories – claims Gulden later rebutted. Last week, a group of U.S. lawmakers wrote to Adidas, including retailers, asking for information on whether the company imports products derived from forced labor in China.
Yeezy’s debacle continues
The decision to sell Yeezy shoes rather than destroy merchandise is Adidas’ clearest update to date on a dilemma that has plagued the company since October, when Adidas ended its partnership with Ye. The company’s shares soon after hit a nearly eight-year low, though the stock has since rebounded and is up 30 percent this year. The shares finished 2.1 percent on Thursday.
“Shoes are selling out,” said Matt Powell, a sporting goods analyst. “Speculators will delight in this product, assuming they can turn it profitably, as these will be the last Yeezy products on the market.”
But even with the apparent Yeezy brand resolution, Adidas hasn’t quelled all of its investors’ concerns, especially those related to Ye’s alleged misconduct within the company.
Union Investment – one of Adidas’ largest shareholders – pressed the brand’s management for how long it had been aware of Ye’s problematic behavior and why it had not taken any action before last October.
Adidas declined to go into details of the shareholder lawsuit but provided an update on its own separate internal investigation into Ye’s workplace conduct, which it launched in November after receiving an anonymous letter from former employees outlining complaints about his alleged misconduct.
CFO Ohlmeyer said that “[Ye’s] his erratic behavior and misbehavior during the partnership meant we had a pretty tough working environment,” but added that the most serious allegations – including harassment of female employees and the allegation that the rapper showed pornographic material to Adidas employees – were not supported by an internal investigation by the US firm legal.
The company maintained that it was unaware of reports of Ye’s problematic behavior at work prior to the anonymous letter in November, denying a claim in the lawsuit that Adidas knew but ignored his behavior.
Bright points
Key shareholders have finally expressed their confidence in Bjørn Gulden’s turnaround plan, which aims to reassert the brand’s credibility in performance sports products and return to growth in China and North America. As part of the plan, Adidas will also refine its partnership strategy to focus on fewer, more influential collaborations.
“You have a lot of work ahead of you to help Adidas unleash its potential again,” said Janne Werning, head of ESG Capital Markets at Union Investment, one of Adidas’ largest shareholders. “We are confident that you can turn the tide.”
There is light at the end of the tunnel for Adidas. Analysts say the growing demand for Samba and Gazelle shoes with the upcoming release of Fear of God Athletics will offset some of the losses caused by Yeezy’s closure. Meanwhile, a turnaround is slowly taking place in China, once the brand’s most profitable market.
“We don’t deliver for a number of reasons,” Gulden said. “But we have all the ingredients for future success.”
