By Ariel Solomon
- An investor lawsuit against Adidas over Kanye West’s behavior has been dismissed as judge believes investors were not misled
- Adidas suffered steep losses after severing ties with Yeezy but forecasts over $100M in operating profit for 2024
Adidas can enjoy a brief sigh of relief as Judge Karin Immergut has agreed to dismiss a lawsuit brought on by Investors, in a post-Yeezy sneaker universe. For years, rapper Kanye West had been making headlines for his erratic behavior and extreme remarks, ultimately leading Adidas to cut ties in 2022, following his anti-semitic remarks. Investors claim that they were not effectively warned about West’s behavior before this occurred. The judge however sided with Adidas, stating that Kanye West had exhibited such behavior for quite some time, and that Adidas did not ‘mislead’ investors.
Why This Matters: The outcome of this lawsuit has two winners — Adidas and consumers. For Adidas, this is pleasant news as the brand suffered incredible losses post the split with Kanye West, including a $600 million dollar loss in the last quarter of 2022 and a $63 million loss in 2023. Things are looking up for the German brand however. Adidas is already reaping profits of $205.5 million from the second quarter of 2024 report which is an 11% increase from the previous year. This means consumers still believe in the brand. With these over-the-top performance metrics, they’ve recently increased their guidance for 2024, expecting an operating profit of over $1 billion this year, up from a previous forecast of less than $800 million.
For consumers and investors, this is an excellent case study and reminder to be diligent about the various facets of one’s investment, including the activities and whereabouts of a brand’s ambassadors. In this case, the judge believed investors were not misled, given that Kanye West’s behavior had been rather visible for years. And while investors have 30 days to refile this case, the chances of a different outcome are minimal.
Situational Awareness: Adidas had some big decisions to make in 2022 regarding one of its highest grossing lines, and continues to have decisions to make regarding the handling of excess inventory. If you visit Adidas.com today, you’ll see that Yeezy’s are heavily discounted as the company looks to liquidate and start fresh. Investors too have had, and continue to have, a decision to make. Ultimately, Adidas has dodged a bullet and hopefully focuses on its core business, stabilizes its market position, and potentially enhances the consumer experience.
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