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

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 ($1.3bn) 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 on Thursday 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 organisations that West, who changed his name to Ye in 2021, had harmed with his comments.

Gulden said the company had decided against donating the sneakers to avoid them reaching the market in a roundabout way.

Shares in Adidas were up 2 percent at 1245 GMT.

“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 minimising a $700m 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 percent of turnover, according to media reports. Adidas has declined to comment on this.

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

Gulden said recently that he envied Adidas for the collaboration when he still served as CEO at Puma.

Challenging work environment

Also on Thursday, Adidas chief financial officer Harm Ohlmeyer said an internal investigation into alleged misconduct by Ye – including showing pornographic material, making anti-Semitic remarks and harassing female employees – had not substantiated the allegations.

However, the investigation also concluded that the rapper’s erratic and sometimes inappropriate behaviour made for a challenging work environment at Adidas, Ohlmeyer said, adding that the company was now in the process of implementing measures to prevent such problems from occurring in the future.

A lawsuit in a German arbitration court in which Adidas is seeking damages from Ye is still in the early stages and no financial sum has been determined, Ohlmeyer said.

Ye did not immediately respond to a request for comment on Facebook.

First-quarter results showed a decline in sales to 5.27 billion euros ($5.75bn), down from 5.3 billion euros ($5.79bn) a year ago.

But investors have high hopes Gulden can turn Adidas around. The stock has gained around 65 percent since November 4, when Gulden was first floated as a successor to former CEO Kasper Rorsted.

“We will do everything to bring Adidas back to where it belongs,” Gulden, wearing a red tracksuit, told investors.