A+ Adidas Falls to A- As the Kanye West Effect Drops Its Rating

A+ Adidas Falls to A- As the Kanye West Effect Drops Its Rating

The Yeezy Enigma, Kanye West was feeling the stint after having his business deals down the line. Soon after Adidas terminated its partnership with the Donda Rapper, the market valuation of Yeezy reached an all-time low resulting in $1.5 billion evaporating from his net worth. However, it was not West alone taking the hits. The scraping of the partnership has been proved to be a huge blow to the German multinational as well, costing it more or less the same forfeiture. 

The sportswear giant’s global credit risk scores degraded from A+ to A- a couple of days ago. The credit ratings which were published earlier this week on Tuesday also gave a clear warning that the scores are susceptible to falling again in no time. The agency’s risk appetite for the company in debt has thus been downgraded owing to the uncertainty faced on Adidas’ end to repay the borrowings. 

For the unversed, S&P Global credit rating is a certain type of barometer that describes an entity or a company’s creditworthiness through its regulated credit scores. They are basically opinions about the bandwidth of an organization or legitimate brand and company to take care of their credit scores by repaying the debts on time. 

ALSO READ: After the Exit of Kanye West, Adidas Left with $2 billion Dollar Gap Despite Making $40 Million in Sales with Beyonce’s Deal

Companies across the globe use the scores to keep a check on their financial balances and meet their annual global rating scores to keep up with the rapidly evolving industries. Thus, after witnessing major earnings concerns for Adidas in this case, following the demise of the Kanye West partnership, S&P has cut down its risk appetite. 

How has the Kanye West Effect affected Adidas? 

After being called out by Campaigns against anti-Semitism, the sneaker mogul called off its ties with Ye leaving itself with a pile of $1.3 worth of unused stock. The same has affected the sale of the products leading to a degradation in market valuation. Confirming the same, S&P Globals has cut Adidas’ long-and-short-term credit ratings. 

The reasons cited by the agency read, “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.” Referring to its struggle to overtake rival brands like Anta, S&P predicts, “its total sales come under pressure in the west as well if a recession curbs consumer spending.

What is your take on the matter? Do you think the sportswear brand will be able to build up from the ruins soon? Let us know in the comments below.

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