The Herzogenaurach only expect a profit of half a billion euros.
(Photo: Reuters)
Munich The sporting goods group Adidas has lowered its outlook for the current year for the third time. The group justified the renewed correction of the forecast on Thursday with ongoing problems in China and reduced consumer demand in western markets.
In view of the weak development and the increased material prices, Adidas announced an austerity program. The costs are to be reduced by up to 500 million euros.
The world’s number two in the sporting goods market has been struggling with a number of challenges for some time. Competitors like Puma are currently growing much faster. In addition, the supervisory board must find a new CEO. CEO Kasper Rorsted is leaving early next year.
In the third quarter, the hoped-for revival of business largely failed to materialize. Adidas announced that sales had increased by four percent currency-adjusted to 6.4 billion euros. Profit from continuing operations fell from 479 to 179 million euros between July and September. This was also due to charges related to the withdrawal from Russia.
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For the year as a whole, the group now only expects a currency-adjusted increase in sales in the mid-single-digit percentage range and a profit from continued operations of around EUR 500 million. In the already lowered forecast, Adidas had still expected sales growth in the mid to high single-digit percentage range and a profit of around 1.3 billion euros. The original expectations were even higher.
The Franconian group is particularly concerned about the decline in sales in China. This is also due to the corona lockdowns in the important market. But Rorsted also admitted in an interview with the Handelsblatt: “Of course we made mistakes in China.” At times, the group did not have the right products for the market: “We were not good enough at understanding the consumers.” Local buyers, for example, wanted a “Chinese touch”.
Problems with brand star Kanye West
The problems in China continued in the third quarter. Currency-adjusted sales there fell “in the strong double-digit percentage range”, it said in a statement. This is due to new corona restrictions, but also to “significant inventory reductions”. In the rest of the world, Adidas grew double-digit on a currency-adjusted basis. However, the consumer climate has also recently deteriorated in the western markets in view of the Ukraine war and rising inflation.
Adidas has an additional problem due to the looming end of the collaboration with Kanye West. In good times, the cooperation with the erratic and controversial US rapper Adidas brought in sales of more than one billion euros a year.
But the musician, who is also known today under the name Ye, rode violent attacks against Adidas on social media and accused the group, among other things, of copying the design of the “Yeezy” shoes he designed and using them for their own Adidas models. After unsuccessful discussions in the background, the group announced that it would put the partnership to the test.
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A separation is probably painful for Adidas. But the group is likely to have seen itself confirmed in the past few weeks. First, allegations of anti-Semitism were made against West, then his accounts on Twitter and Instagram were blocked and the artist announced that he would buy the right-wing Twitter competitor Parler.
Investors had called for a turnaround at Adidas in the past few months. According to some experts, the sports and fashion group also has an innovation problem. “The share of new products in sales has gradually fallen in recent years,” said Ingo Speich, who is in charge of corporate governance and sustainability at Deka.
The next CEO will have to solve the many problems. According to information from the Handelsblatt from supervisory board circles, however, no successor for Rorsted has yet been found. An external solution is considered likely. The share price also suffered from the weak industry environment and internal problems. In the current year, the stock market value of the group has more than halved.
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