Adidas said that shutting operations in Russia and Covid-19 difficulties in Vietnam would hurt sales, but an improved China forecast helped the German sportswear company’s shares rise 10% on Wednesday.
The firm has approximately 500 storefronts in Russia, accounting for about a quarter of its total, which it said on Monday will be closing along with online sales.
Adidas forecasts an 11-13 per cent gain in currency-neutral sales in 2022, despite the danger to its business in Russia and Ukraine, and sales growth in the mid-single digits in Greater China following a consumer boycott in 2021.
According to CEO Kasper Rorsted, the shutdown of manufacturing in Vietnam due to Covid-19 would result in a 600 million euro ($658 million) drop in first-quarter sales before a substantial return in the second quarter.
At 10:30 GMT, Adidas shares were up 10.2 per cent, boosted by a reasonably bullish view for 2022, particularly in China, with analysts noting that the profits projection was ahead of consensus forecasts.
“The tone appears more constructive here than Puma was a couple of weeks ago,” said Jefferies analyst James Grzinic.
Last month, Puma predicted that sales would increase by at least 10% in 2022, but warned that a consumer boycott in China and cost concerns would restrict profit growth. find out more
The Ukraine conflict, according to Adidas, may threaten revenues of up to 250 million euros in the area in 2021, or around 1% of total company sales.
Adidas has already made over 100 million euros in the region before closing its stores, and might make another 100 million if it reopens in Russia or switches its products to other countries, according to finance head Harm Ohlmeyer.
The Ukraine crisis has had no influence on customer confidence at Adidas, and the company is keeping to its medium-term goals, according to Rorsted, who noted that the athletic goods business is normally resilient during times of financial stress.
Adidas reported a 24 per cent drop in fourth-quarter sales in Greater China, where it named Adrian Siu as its new regional business president on Tuesday. Siu joined Adidas in Hong Kong in 2002, but departed in 2019 to become the CEO of the Chinese brand Cosmo Lady.
Rorsted predicted that sales in China will begin to increase in the second quarter, citing the company’s signing of local athletes and efforts to build new items specifically for China to compete with local brands.
During a boycott of Western goods by Chinese customers, the firm was targeted after corporations stated that they would not source cotton from Xinjiang due to reports of human rights violations there. Beijing denies any wrongdoing.
(Adapted from USNews.com)
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