German sportswear company Adidas (GB:0OLD)(ADDYY) ended the Yeezy partnership (terminated its relationship with Kanye West) last year over the musical artist-turned-designer’s anti-Semitic remarks. However, the fallout of this partnership continues to hurt Adidas.
While the company is losing sales due to its exit from the deal, a group of investors sued Adidas for not taking action to safeguard shareholders’ interests despite knowing about the rapper’s extreme behavior and the negative impact of the deal’s fallout.
Investors, who filed the lawsuit, claim that Adidas failed to take precautionary measures to restrict financial losses before ending its partnership with West due to his behavior. They allege that the company’s top executives knew about West’s offensive remarks before ending the partnership, yet they failed to warn investors.
Adidas’ spokesman rejected the claims and said that the company would take the necessary measures to defend itself.
While Adidas faces a lawsuit, it will release its Q1 financial results on May 5. Analysts expect Adidas’ revenue to decline due to the exit from the Yeezy partnership and weakness in China. At the same time, analysts expect Adidas to report a loss, reflecting lower sales, increased supply chain costs, and higher promotional activity.
Is Adidas a Buy, Sell, or Hold?
The ongoing sales and margin headwinds are keeping analysts sidelined on Adidas stock. It has received a Hold consensus rating based on five Buys, 11 Holds, and four Sells. Meanwhile, the average price target of €150.55 implies 5.28% downside potential.
