Since the Chuck Taylor became one of the most famous shoes in history, the celebrity sneaker deal has been a significant part of the industry. Of course, for every Michael Jordan empire, there is a Michael Vick disaster. And for every Kobe Bryant success, there is a Kyrie Irving failure that rocks the fashion news world. That makes it a risk for shoe brands to take the leap on celebrities, having to rely on their consistency and constant relevance, a lesson that Adidas has learned the hard way with Kanye West’s Yeezy line, as they are set to possibly lose $500 million in unsold product and a $2 billion annual sales number, according to The Washington Post.
Kanye West, or Ye as he is now legally named, is no stranger to controversy. Most recently, the rapper has become the face of accountability for celebrities who say things the rest of the world knows are inappropriate, outdated, or downright hateful. Following an appearance in a “White Lives Matter” shirt alongside conservative pundit Candace Owens and a string of antisemitic remarks, Adidas has elected to end their working relationship with Kanye West. What the company is left with is a Yeezy line of shoes that typically pulls in nearly $2 billion a year. Of course, no matter how big a company you are, a hit that big is bound to cause some financial woes.
Balenciaga, JPMorgan Chase, and Gap all distanced themselves from Kanye West as well, although many of his other business partnerships didn’t have the same dilemma that Adidas does.
Adidas’ Yeezy problem
The iconic shoe company faces the problem of having $500 million in production costs that they don’t know what to do with. There are only a few options, and none of them are good. They can continue to sell the product at a discount, bringing a minor financial hit but a more significant PR problem. The public is not often a fan of companies continuing to profit off of names that have been disgraced in the eyes of the public. They can trash the product, but burning them or filling landfills brings with it environmental ethics that can’t be ignored. They can donate them to developing nations or disaster relief, which gives them a little PR to balance out the bad PR of not acting soon enough. Or they can sell them in foreign markets that aren’t as angry about the Kanye West situation, which has the same result as the first option. There is no great road out of this situation for Adidas or the Yeezy line.
As it is, the company reported a fourth-quarter operating loss of $763 million. For 2023, Adidas projects a full-year operating loss of 700 million euros and has called 2023 a transition year.
What did Kanye West say about Adidas?
Kanye West and Adidas may have a long-standing working relationship that dates back to before his fall from grace, but their beef also goes back. West called the company out for blatant copying of his work as early as last May when the brand released Adilette 22 sandals that resembled the Yeezy slides. He accused the brand of trying to cut him out of the creative planning of the line and developing or widening his brand without his approval.
Per People, West wrote the following in a deleted Instagram post: “The fact [Adidas] felt they could color my shoes and name them without my approval is really wild,” he said about the brand. I really care about building something that changes the world and something I can leave to my kids. They tried to buy me out for 1 billion dollars [USD]. My royalties next year are 500 million dollars [USD] alone.”
With the likes of Kanye West and Kyrie Irving seemingly having public meltdowns, causing their respective brands to rethink their partnerships, we may see a real-time shift in the industry. Social media and the new culture of holding celebrities accountable for their actions make the risk of betting all on these personalities something many brands and companies may not be able to do. For Adidas, they learned a $2 billion lesson that the rest of the industry is set to capitalize on.
