adidas Debt Rating Slashed By S&P After Earnings Spiral, Blame Yeezy?
Written by djfrosty on February 24, 2023
Source: Jeremy Moeller / Getty
In another bad sign for adidas after cutting ties with Ye aka Kanye West, their credit ratings have been cut by S&P Global due
to the company’s expectations of earnings losses for 2023.
In a disclosure statement that was published on Tuesday (February 21st), the noted agency that judges the ability of companies to pay back what they’ve borrowed declared that they were cutting the global athletic brand’s long and short-term credit rating from “A+” to “A-“. They based this on the company’s warnings that their earnings would take a serious hit after cutting ties with the controversial artist. Adidas had previously projected that the dissolution of their deal with Ye could cost them $1.3 billion.
“Adidas faces a multitude of business challenges, including the termination of its Yeezy partnership, ongoing competitive pressures in the Chinese market, and a contraction of consumer demand in Western countries,” it said in the statement. They went on to state that adidas’ warning had a tremendous effect on their decision, especially when it came to uncertainty over their remaining Yeezy stock that it could still write off and not refit for sale. “This estimate is materially worse than our previous base-case scenario.”
Adidas terminated its partnership with Ye in late October after the DONDA artist had made a string of antisemitic comments. This included an appearance on the Drink Champs podcast where he publicly challenged the brand over his behavior and comments taken from an unaired interview with Tucker Carlson of Fox News.
S&P Global Ratings is not the only group of its kind to have a gloomy outlook on adidas’ expected financial fortunes for the year. Bernstein Research published a report that the company might’ve experienced these struggles even if it maintained its ties with Ye. They also projected that Adidas could experience losses of $2 billion, more than the estimated figure expressed in their disclosure statement. “The sales decline is about more than just Yeezy,” Bernstein analyst Aneesha Sherman said in an internal note. “We are concerned about the underlying health of the business that would drive such a drastic guide-down, even after stripping out the Yeezy impact.”