Adidas has a lot of worries: stocks are piling up, Chinese sales are lagging and Ye (formerly Kanye West) is causing problems. Add to that international protests next week. One would issue another profit warning for less.
Profits and margin plummet
Things are far from going well for Adidas. The trainer manufacturer is once again lowering its expectations: instead of 5-10% sales growth in 2022, Adidas now expects about 5% more sales at constant exchange rates. The margin will also be lower and, above all, the profit forecast has been revised sharply downwards: it will not amount to 1.3 billion euros of net profit this year, but only 500 million euros.
Indeed, the past quarter was no success. Sales rose 4% excluding currency effects, but in China sales fell by high double digits – still due to Covid restrictions – and in the West sales are slowing down due to strong inflation. Below the line, profits almost halved from a year earlier. Adidas then also had 300 million euros worth of one-off costs, including for leaving Russia.
Hassle with rappers and workers
At the same time, the sports brand sees inventories piling up and is completely losing control over Ye (Kanye West’s new name), with whom Adidas has a long-term partnership. Following anti-Semitic statements and other tirades, there is increasing pressure to cut ties, while Ye itself has already accused the label of breaching the contract.
Adding insult to injury, activists are campaigning in front of shops and factories worldwide next week. The Pay Your Workers campaign, backed by hundreds of civil society organisations and dozens of garment workers’ unions, is calling on Adidas from 24 to 30 October to respect the rights of workers in its supply chain. The brand allegedly stole wages from workers during the pandemic by reducing or halting production. Adidas rejects the allegations and says it ensured continuity so that workers kept their jobs.
