Shares in Adidas jumped 9.3% to €202.2 in Frankfurt after the German trainers-to-sports apparel firm posted strong 2021 results and said it expects to deliver double-digit sales growth in 2022.
Having suspended operations in Russia, Adidas forecasts an 11% to 13% increase in constant currency sales in 2022, which includes the risk to its business in Russia and Ukraine, with Greater China sales to increase in the mid-single digits as business in the region rebounds following last year’s consumer boycott.
Led by CEO Kasper Rorsted, Adidas also sees net income from ongoing operations growing to between €1.8 billion and €1.9 billion this year.
ADIDAS DELIVERS
Despite supply chain disruptions, a difficult backdrop in China and ‘extensive’ Covid-related lockdowns in Asia-Pacific, Adidas delivered impressive 16% sales growth in 2021, driven by growth in all markets with both the wholesale business and Adidas’ own retail stores recovering from the pandemic and double digit growth from its direct to consumer business providing a boost.
Net income from continuing operations rose by more than €1 billion to the best part of €1.5 billion as gross margins benefited from better stock management and higher full price sales.
‘We delivered a strong set of results despite several external factors weighing on both demand and supply throughout the year’, enthused Rorsted.
‘Wherever markets operated without major disruptions we have been experiencing strong top-line momentum. This is reflected in double-digit revenue growth in EMEA, North America and Latin America.’
UPBEAT OUTLOOK
In confident mood following its recovery from the pandemic, Adidas expects double-digit sales growth to continue in 2022 even in the face of heightened uncertainty.
Driven by the execution of its ‘Own the Game’ strategy and a ‘strong’ product pipeline, revenues are projected to increase by between 11% and 13%.
And this growth assumption already includes a risk of up to €250 million in Adidas’ Russia/CIS business due to the war in Ukraine and the suspension of its retail and online operations in Russia.
‘Unfortunately, we release our 2021 results in unsettling times,’ continued Rorsted.
‘Our thoughts and prayers are with the Ukrainian people, our teams on the ground and everyone affected by the war. We strongly condemn any form of violence and stand in solidarity with all those calling for peace.’
As Shares explained here, along with Nike, Adidas is part of a duopoly in the global sportswear market. These companies’ brand strength and distribution capacity are in a league of their own, creating very strong barriers to entry and helping to protect their profitability.
The winter World Cup in Qatar at the end of 2022 should provide a shop window for the brand, given it is the kit manufacturer for several of the top teams due to compete at the tournament.
Qatar’s human rights record makes this a somewhat controversial event and Adidas is also having to balance human rights concerns in China with an aspiration to capitalise on what is one of its fastest growing and most substantial markets.
