Wednesday LOSER

October 26, 2022
You may have heard us say before that politicized mentions rarely move the needle in terms of a company’s profitability. 

And while that may be true in most cases we’ve seen; a rare case may be presenting itself. 

In this instance, an already struggling brand just took a punch to the face. 

Adidas (ADDY) has been receiving backlash from consumers due to its Yeezy Brand partnership with Kanye West, whose recent anti-Semitic remarks have generated a firestorm of controversy. 

The hashtag #adidasdropkanye has taken Twitter by storm, with many consumers questioning the brand’s actions over the last week.
LikeFolio’s Consumer Happiness data clearly reflects this negative sentiment.
ADDYY’s Happiness levels fell from 67% to 41% in just a 5-day span (7-day MA). 

That’s a HUGE move and a VERY LOW Happiness score. 

On Tuesday, October 25, Adidas announced the termination of its partnership with Kanye West and decided to end the production of Yeezy products. 

This move is expected to cost ADDYY $250 million in income this year. 

According to one analyst, the Yeezy brand generates an estimated $2 billion per year, which is around 10% of the company’s annual revenue. 

Adidas has already been struggling financially, with the stock down 64% so far in 2022, and just a couple of dollars off from 52-week lows.

In addition, due to slower than expected economic recovery in China, the company cut its 2022 outlook back in July.

And with economic slowdown all over the world, the German sportswear brand’s operating profit decreased by 28% in 22Q2.

These headlines are just adding fuel to the fire as Adidas prepares for its upcoming third-quarter earnings release.

While it’s a little too early to tell if these politically-focused mentions make a noticeable impact on the company long-term, the short-term outlook looks anything but promising.

We’ll be keeping a close eye on this name as we head into the holiday season.

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