The business of the sporting goods company in China is going badly.
(Photo: Reuters)
Munich Adidas’ China business collapsed again in the second quarter. Currency-adjusted sales in the important market fell by 35 percent to 719 million euros. This is mainly due to the “continued extensive Covid-19-related restrictions”, Adidas announced on Thursday. In contrast, sales in the rest of the world increased by 14 percent.
The sporting goods company had warned last week that business was going worse than planned. Since then, Adidas has only expected sales growth in the mid to high single-digit percentage range for 2022. Originally, CEO Kasper Rorsted had promised an increase of up to 13 percent.
Adidas also had to lower its profit expectations. A profit of around 1.3 billion euros is now expected instead of up to 1.9 billion euros originally. The operating margin for the year as a whole will probably only be seven percent.
Overall, however, Rorsted is hoping for an upturn in the second half of the year. Although China is only recovering slowly, he expects double-digit growth rates for the entire group.
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As already reported, adidas sales in the second quarter increased slightly by four percent after currency adjustments to 5.6 billion euros. Despite a positive tax effect, profit from continuing operations fell from 387 to 360 million euros.
Business at Adidas is currently worse than at Puma. The smaller competitor’s sales increased in the second quarter by 18 percent, adjusted for currency effects, to more than two billion euros for the first time. “This illustrates the strong demand for our products despite all the global challenges and uncertainties,” said Puma boss Gulden.
While Adidas lowered the forecast, Puma actually raised it. CEO Gulden now expects sales growth in the mid-teens percent range. The operating result (EBIT) should increase from 557 million euros to 600 to 700 million euros.
Daniela Bergdolt, Managing Director at the German Association for the Protection of Securities, was critical of Adidas: “It’s sometimes going worse than others in the industry, and the question is why.” The group always emphasizes that it has a full product pipeline. But if others grow faster, you either don’t have the right advertising medium or you’re not innovative enough.
More: Investors are calling for a turnaround at Adidas