Adidas (ETR: ADS) share price pulled back on Wednesday amid rising concerns about the company. The firm slashed its dividend and warned of a tough road ahead toward recovery. It dropped to a low of €140, which was a few points below the year-to-date high of €161.96. In contrast, Nike stock has jumped by almost 50% from its lowest level in 2022.
Adidas has become the Credit Suisse of the company faces numerous challenges. In 2022, the firm saw its business struggle because of China’s Covid-19 lockdowns. As the year was coming to an end, it found itself in a scandal after Kanye West’s outbursts. As I wrote at the time, the company decided to end its partnership with Ye.
Credit Suisse, a giant Swiss bank, has seen its market share diminished because of multiple crises. It was involved in the Archegos collapse, Mozambique tuna bonds, Greensill Capital collapse, and other challenges. As a result, clients have been forced to withdraw their funds and move to other Swiss banks like UBS and Julius Baer. It also ended its dividend a few years ago.
Adidas is in a similar situation. It has now lost Ye, one of the biggest players in the company. It was estimated that Ye was bringing in sales worth more than a billion dollars per year. According to Bloomberg, if it writes of Ye’s inventory, the company will have a loss of about $500 million. This will be the first loss in over 30 years.Watch here: https://www.youtube.com/embed/h5MSaMsCBpQ?feature=oembed
Adidas is also facing the challenge of inventory. It is estimated that the company has an inventory of over $6 billion, which is a big number considering that the firm has a market cap of over $20 billion.
It also has a Beyonce problem. Recent results show that the company’s partnership with Beyonce is not working out well. Sales of Ivy Park plunged by 50% to $40 million. Adidas was expecting these sales to be about $120 million.
ADS stock chart by TradingView
On the daily chart, we see that Adidas stock price has made a bearish breakout amid rising concerns about its business. It has collapsed to the 50-day and 100-day exponential moving averages. The shares have moved to the lower side of the ascending channel shown in green.
Therefore, with negative headlines remaining in place, there is a likelihood that the stock will continue falling as sellers target the key support at €100.
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