Shares in Adidas (ADS:ETR) fell 5.6% to €177.7 after the German trainers-to-sports apparel firm downgraded its sales and profit guidance for 2022 due to the negative impact of renewed Covid-related lockdowns in China.
Less than two months after providing an upbeat forecast for the year, Adidas reported a 3% drop in first quarter ‘currency neutral’ sales to €5.3 billion, not helped by supply chain constraints following last year’s lockdowns in Vietnam.
However, the company said it was confident of a return to growth in Asia Pacific in the second quarter.
GREATER CHINA DOWN 35%
Led by chief executive Kasper Rorsted, Adidas suffered a 35% quarterly sales slump in Greater China where foreign brands have been hit by consumer boycotts.
Due to the ‘severe impact’ of the fresh wave of strict lockdowns in China, Adidas now expects sales growth for 2022 to come in at the lower end of its previous 11% to 13% guidance range.
Net income from ongoing operations is also forecast to weigh in at the lower end of the previously communicated €1.8 billion to €1.9 billion range.
Part of a duopoly in the global sportswear market along with rival sneaker giant Nike (NKE:NYSE), Adidas also trimmed its 2022 operating margin forecast.
This is now set to remain flat at 9.4% instead of ticking up to between 10.5% and 11%, amid continued investment behind the brand, products and the important direct to consumer (DTC) business.
WESTERN DEMAND STILL STRONG
‘In the first quarter, consumer demand for our brand and products was strong in all Western markets,’ insisted Rorsted.
‘Our combined sales in North America, Europe, the Middle East, Africa and Latin America grew at a double-digit rate. Backed by an exceptionally strong wholesale order book and relentless focus on driving growth in our own DTC channels, we expect this positive development to continue for the rest of the year.’
Rorsted continued: ‘In the East, we will return to growth in Asia-Pacific in the second quarter, while we expect the challenging market environment in Greater China to continue. With strong double-digit growth in the vast majority of our markets, representing more than 80% of our business, we are well positioned for success in 2022.’
