The agency, which judges companies’ ability to pay back borrowings, downgraded its debt ranking for Adidas from “A+” to “A-” Tuesday and warned that that score could fall again soon.
“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,” S&P said in a statement.
Adidas ended its partnership with Ye, the rapper and fashion designer formerly known as Kanye West, in October after he made a string of anti-semitic comments on Twitter and in an unaired interview with Tucker Carlson for Fox News.
In a profit warning issued on February 9, the company warned that the demise of the deal would reduce its earnings by €1.2 billion ($1.3 billion) this year.
“Yeezy” shoes were expected to account for around 7% of all Adidas sales in 2022, according to S&P’s statement.
Adidas is also struggling to overtake rival brands like Anta in China and could see its total sales come under pressure in the west as well if a recession curbs consumer spending.
S&P isn’t alone in sharing a gloomy outlook for Adidas.
Bernstein Research warned earlier this month that the brand could see sales fall by $2 billion in 2023 – suggesting it’d have struggled even if its partnership with Ye hadn’t imploded.
“The sales decline is about more than just Yeezy,” Bernstein analyst Aneesha Sherman said in a note to clients.
“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.”
Adidas’ main listing is on Frankfurt’s Day DAX 40 index but US-based investors can buy its American depository receipts if they want to own shares in the company.
Shares have climbed 8% year-to-date and 47% since the company cut ties with Ye on October 25.