Adidas Cuts Margin Target as It Warns of Falling Sales in China -- Update
06 Maio 2022 - 4:03AM
Dow Jones News
By Joshua Kirby
Adidas AG on Friday set out a much less optimistic view on its
prospects in Greater China this year, newly forecasting a fall in
sales in the key market as pandemic-related lockdowns strangle
demand.
Falling China sales means the German sportswear giant now
expects no expansion in its margins this year.
Adidas's Greater China sales fell 35% at constant currency in
the first quarter, offsetting growth of 13% in North America and 9%
in the EMEA region to result in a total 3% decline in net sales to
5.3 billion euros ($5.59 billion.)
The company noted the challenging market environment in China,
exacerbated by new pandemic-related lockdowns that have led to
store closures and greatly reduced customer traffic. Since the end
of March, China has imposed strict lockdowns in a number of cities
in a bid to combat rising cases of Covid-19.
The pandemic situation means Adidas now expects full-year
Greater China sales to decline significantly, it said. At 2021
results earlier this year, the company had guided for a return to
China sales growth in 2022.
Adidas nevertheless backed its full-year sales target of 11%-13%
organic growth, but said it expects to meet the lower end of the
range. The company expects to return to positive growth in the
second quarter, at around 20%, as supply pressures ease and demand
recovers in Asia-Pacific, adding to momentum in Western markets, it
said.
However, as a result of the less favorable geographic mix, the
company no longer expects its margins to expand on year. Adidas had
previously targeted a gross margin of 51.5%-52% and an operating
margin of 10.5%-11% for the year, growing from the 50.7% and 9.4%
it booked in 2021, respectively.
Despite the less optimistic margin outlook, the company said it
still expects to meet its target for net income from continuing
operations for the year, though, as with the sales target, at the
lower end of a guided range of EUR1.8 billion-EUR1.9 billion.
As well as the pandemic situation, Adidas and peers including
Nike Inc. and Germany's Puma AG have seen their China performance
dragged in successive quarters by a consumer boycott sparked at the
end of March last year. The boycott relates to Western brands'
stance on cotton produced in China's Xinjiang region, where
activists and some governments allege forced labor is used.
Puma Chief Executive Bjorn Gulden said at the company's recent
first-quarter results--when it booked its own Greater China sales
slump of 37%--that the consumer boycott remained the primary
headwind in the country. It remains difficult to assess when this
issue will be resolved, he added.
Write to Joshua Kirby at joshua.kirby@wsj.com;
@joshualeokirby
(END) Dow Jones Newswires
May 06, 2022 02:48 ET (06:48 GMT)
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