Adidas to Sell Some Yeezy Stock, Donate Proceeds

FILE PHOTO: The Adidas logo is pictured during celebrations for German sports apparel maker Adidas' 70th anniversary at the company's headquarters in Herzogenaurach, Germany, August 9, 2019. REUTERS/Andreas Gebert/File Photo
FILE PHOTO: The Adidas logo is pictured during celebrations for German sports apparel maker Adidas' 70th anniversary at the company's headquarters in Herzogenaurach, Germany, August 9, 2019. REUTERS/Andreas Gebert/File Photo
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Adidas to Sell Some Yeezy Stock, Donate Proceeds

FILE PHOTO: The Adidas logo is pictured during celebrations for German sports apparel maker Adidas' 70th anniversary at the company's headquarters in Herzogenaurach, Germany, August 9, 2019. REUTERS/Andreas Gebert/File Photo
FILE PHOTO: The Adidas logo is pictured during celebrations for German sports apparel maker Adidas' 70th anniversary at the company's headquarters in Herzogenaurach, Germany, August 9, 2019. REUTERS/Andreas Gebert/File Photo

Adidas will sell some of the merchandise from its defunct Yeezy partnership with rapper Kanye West and donate part of the proceeds to international organizations, CEO Bjoern Gulden said on Thursday.

The German sportswear giant has been in a predicament over the Yeezy stock since it cut ties with West over his
anti-Semitic comments late last year, with the controversy weighing on its stock and hitting its bottom line.

Millions of Yeezy brand shoes with a retail value of 1.2 billion euros ($1.3 billion) are sitting in storage after their
sale was put on hold.

Their value in the resale market has rocketed since Adidas stopped producing them, with some models more than doubling in price.

Addressing investors in the southern German town of Fuerth after the debacle contributed to the company's first annual loss in 31 years, Gulden said it had yet to be determined when and how the planned sale would proceed.

"What we are trying to do now over time is to sell some of this merchandise ... burning the goods would not be a solution," he said, adding the proceeds would be donated to international organizations that West, who changed his name to Ye in 2021, had harmed with his comments.

Shares in Adidas were up 2.2% at 1000 GMT, Reuters reported.

"It's a smart and responsible move," said Ed Stoner, a sportswear industry consultant who previously worked at Adidas, adding it "not only preserves the brand's integrity but avoids a sustainability crisis."

By selling some of the stock, the company is potentially minimizing a $700 million loss this year, but it is unclear how much stock will be sold and what proportion of the proceeds will be donated.

If the goods are sold, Ye will be entitled to previously-agreed commissions - 15% of turnover, according to media reports. Adidas has declined to comment on this.

Gulden defended Adidas' years-long collaboration with the rapper, saying that "as difficult as he was, he is perhaps the most creative mind in our industry".



LVMH Shares Drop after Missing Second-quarter Estimates

A man walks past a shop of fashion house Dior in Paris, France, April 15, 2024. REUTERS/Manon Cruz/File Photo Purchase Licensing Rights
A man walks past a shop of fashion house Dior in Paris, France, April 15, 2024. REUTERS/Manon Cruz/File Photo Purchase Licensing Rights
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LVMH Shares Drop after Missing Second-quarter Estimates

A man walks past a shop of fashion house Dior in Paris, France, April 15, 2024. REUTERS/Manon Cruz/File Photo Purchase Licensing Rights
A man walks past a shop of fashion house Dior in Paris, France, April 15, 2024. REUTERS/Manon Cruz/File Photo Purchase Licensing Rights

Shares in LVMH (LVMH.PA) fell as much as 6.5% in early Wednesday trade and were on track for their biggest one-day drop since October 2023 after second-quarter sales growth at the French luxury goods giant missed analysts' consensus estimate.

The world's biggest luxury group said late Tuesday its quarterly sales rose 1% year on year to 20.98 billion euros ($22.76 billion), undershooting the 21.6 billion expected on average by analysts polled by LSEG.

At 1000 GMT, LVMH's shares were down 4.5%.

The earnings miss weighed on other luxury stocks, with Hermes (HRMS.PA), down around 2% and Kering (PRTP.PA), off 3%.

Kering is scheduled to report second-quarter sales after the market close and Hermes reports on Thursday, Reuters reported.

Jittery investors are looking for evidence that the industry will pick up from a recent slowdown, as inflation-hit shoppers hold off from splashing out on designer fashion.

JPMorgan analyst Chiara Battistini cut full year profit forecasts by 2-3% for the group, citing softer trends at LVMH's fashion and leather goods division, home to Louis Vuitton and Dior.

"The soft print is likely to add to ongoing investors’ concerns on the sector more broadly in our view, confirming that even best-in-class players like LVMH cannot be immune from the challenging backdrop," said Battistini in a note to clients.

The weakness of the yen, which has prompted a flood of Chinese shoppers to Japan seeking bargains on luxury goods, added pressure to margins, another source of concern.

Equita cut 2024 sales estimates for LVMH by 3% - attributing 1% to currency fluctuations - and lowered its second half organic sales estimate to 7% growth from 10% growth previously.

The lack of visibility for the second half beyond the easing of comparative figures - as the Chinese post-pandemic lockdown bounce tapered off a year ago - is unlikely to improve investor sentiment to the luxury sector, Citi analyst Thomas Chauvet said in an email to clients.

"No miracle with the luxury bellwether; sector likely to remain out of favour," he wrote.

Jefferies analysts said the miss came as investors eye Chinese shoppers for their potential to "resume their pre-COVID role as the locomotive of industry growth and debate when Western consumers will have fully digested their COVID overspend".

LVMH shares have been volatile since the luxury slowdown emerged, and are down about 20% over the past year, with middle-class shoppers in China, the world's No. 2 economy, a key focus as they rein in purchases at home amid a property slump and job insecurity.

LVMH offered some reassurance, with finance chief Jean-Jacques Guiony telling analysts during a call on Tuesday that Chinese customers were "holding up quite well," while business with US and European customers was "slightly better".