Is it the new Credit Suisse?

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 slashes dividend

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.

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. 

Adidas share price forecast

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.