Latest / Boardroom Conversations with Fexingo: CEOs, Strategy, and Corporate Leadership Explained / How the Adidas Board Navigated the Kanye Fallout
Transcript
- Lucas: If you follow sneaker culture or just retail generally, October 2022 is a date you remember. That's when Adidas cut ties with Kanye West after his antisemitic comments. And for the board, it wasn't just a PR crisis—it was a billion-dollar inventory problem. Luna: A billion is not an exaggeration here. At the time, Yeezy was generating something like one point five billion euros in annual revenue for Adidas—roughly eight percent of total sales. Lucas: Right. And the board had to make a call almost immediately. Do you keep selling the existing Yeezy inventory and risk being seen as profiting from hate? Or do you write off everything and take a massive financial hit? The board chose the latter initially. Luna: They announced a write-off of the entire Yeezy inventory in the first quarter of 2023. That was about one point two billion euros in unsold product sitting in warehouses. Lucas: But then the shareholder lawsuits started. Investors argued the board had a fiduciary duty to recover some value from that inventory. So the board had to pivot. They came up with this plan to sell the inventory in tranches and donate a portion of the proceeds to anti-hate charities like the Anti-Defamation League. Luna: That's a delicate balancing act. They couldn't just dump the sneakers—that would crater the brand. They had to control supply and timing. Lucas: Exactly. The first drop of leftover Yeezys happened in May 2023. Adidas limited the quantities, sold them on their own app, and earmarked a significant percentage of revenue for donation. By the end of 2023, they had generated about seven hundred million euros in revenue from those liquidations. Luna: So they recovered more than half the inventory value. That's not bad for a crisis that could have destroyed the whole partnership model for the company. Lucas: But here's the deeper governance lesson. The board realized that the Yeezy partnership had created a massive single point of failure risk. One person's behavior could tank the entire footwear division. So they've since restructured how celebrity collaborations are approved. Luna: What did they change exactly? Lucas: They now require any collaboration contract to include a moral clause with teeth—meaning the brand can terminate immediately and keep all IP. And they've diversified their celeb roster. You see Adidas working with smaller, more controlled partners now, like Bad Bunny or Jerry Lorenzo's Fear of God line. Luna: So it's not just about crisis management. It's about rewriting the playbook for how you do these partnerships going forward. Lucas: Exactly. And that's what makes this board story interesting. They didn't just react—they changed the system. The Yeezy episode forced Adidas to confront how dependent they were on one personality. Luna: It's a reminder that brand equity built on a single individual is fragile. The board's job is to protect the company beyond any one person. Lucas: If today's conversation was useful to you, that's exactly why we do these episodes. And the reason we can stay ad-free is listener support. If you want to keep this going, you can always buy me a coffee dot com slash fexingo. Luna: Yeah, it genuinely helps us keep the lights on and the content independent. No pressure, just if you find value here. Lucas: So back to Adidas. One other thing the board did that I think is underappreciated: they brought in an outside consultant to review the entire celebrity partnership process. That's not something you do if you think it's a one-off mistake. Luna: That suggests they see structural risk, not just a bad actor. Lucas: Right. And they've since capped the revenue share any single collaboration can contribute to the overall footwear segment. No more than five percent from any one partner. That's a direct result of the Yeezy shock. Luna: It's almost like a portfolio approach to brand partnerships. You don't put all your eggs in one celebrity. Lucas: Exactly. And that's the kind of board-level thinking that turns a crisis into a long-term governance improvement. The Yeezy episode cost Adidas billions in market cap temporarily, but the structural changes might be worth more over time. Luna: I'd call that a solid case study in how a board can navigate a reputational and financial crisis without losing its way. Lucas: Absolutely. And the final chapter isn't written yet—Adidas is still selling through Yeezy inventory in 2024 and 2025. But the board's handling of it has largely been praised by governance experts for being transparent and adaptive. Luna: It's a good example for any company with a celebrity or influencer partnership. The question isn't if something goes wrong, but when—and whether the board is prepared. Lucas: And that's the takeaway. Boards need to stress-test their most valuable partnerships. What happens if your star partner implodes? If you don't have an answer, you're not done with the risk assessment. Luna: Well said. Thanks for joining us on Boardroom Conversations.