Adidas Debt Rating Slashed As Kanye West Termination Hits Earnings

Adidas Debt Rating Slashed As Kanye West Termination Hits Earnings

  • S&P Global Ratings said on Tuesday it believed Adidas would have a harder time repaying its debts.
  • The sportswear giant has warned it will lose $1.3 billion when its partnership with Yeezy ends.
  • Adidas ended its deal with Kanye West in October after repeated anti-Semitic comments.

S&P Global Ratings reduced its long and short term credit ratings For Adidas after the German sportswear giant warned that the end of its partnership with Kanye West risks plunging profits.

The agency, which judges the ability of companies to repay their loans, lowered Adidas’ debt rating from “A+” to “A-” on Tuesday and warned that this score could fall soon.

“Adidas faces a host of business challenges, including the end of its partnership with Yeezy, continued competitive pressures in the Chinese market, and a contraction in consumer demand in Western countries,” S&P said in a statement. statement.

Adidas ended its partnership with Ye, the rapper and fashion designer formerly known as Kanye West, in October after he made a series of anti-Semitic comments on Twitter and in an unaired interview with Tucker Carlson for FoxNews.

In a profit warning issued on February 9, the company warned that the disappearance of the agreement would reduce its profits by 1.2 billion euros (1.3 billion dollars) this year.

“Yeezy” shoes are expected to account for about 7% of all Adidas sales in 2022, according to the S&P statement.

Adidas is also struggling to overtake rival brands like Anta in China and could see total sales under pressure in the west as well if a recession dampens consumer spending.

S&P isn’t alone in sharing a gloomy view of Adidas.

Bernstein Research warned earlier this month that the the brand could see its sales drop by $2 billion in 2023 – suggesting he would have struggled even if his partnership with Ye had not imploded.

“The drop in sales isn’t just about Yeezy,” Bernstein analyst Aneesha Sherman said in a note to clients.

“We are concerned about the underlying health of the business that would lead to such a drastic decline, even after removing the impact of Yeezy.”

Adidas main roster is on Frankfurt DAX-40 index, but US-based investors can buy its US certificates of deposit if they want to hold shares in the company.

Shares are up 8% year-to-date and 47% since the company severed ties with Ye on Oct. 25.

Learn more: Adidas faces an even bigger problem than Yeezy