China and Russia hold Adidas back

Although sales bounced back for Adidas, profits fell by more than a quarter in the last three months. The withdrawal from Russia and lockdowns in China have cost the sports brand dearly.

Losing Russia

“Sports are back at centre stage this summer,” rejoices Kasper Rorsted, CEO of Adidas, after two years of Covid restrictions. Sales in the core categories of football, running and outdoor grew by double digits in the second quarter, “amid heightened macroeconomic uncertainty”. Today, 20% of these sales come from direct to consumer sales.

Excluding currency effects, total sales increased by 4%, mainly thanks to the Western markets. Nevertheless, the suspension of operations in Russia due to the war in Ukraine cost the sports goods manufacturer 100 million euros in sales, while supply chain problems in Vietnam – still caused by lockdowns last year – cost another 200 million euros in sales. Operating profit fell 28% year-on-year to 392 million euros.

China recovers too slowly

The situation in China (-35% in sales in the last quarter) also remains difficult, according to Rorsted: the recovery is slower than expected due to persistent coronavirus restrictions. In addition, the brand fears a possible slowdown in consumer spending in other markets later this year.

Adidas is therefore lowering its forecast for the full year. The sportswear manufacturer is now anticipating sales growth of between 5 and 9%, excluding currency effects. Previously, the multinational was expecting 11 to 13% growth. At the end of the year, the company expects a net profit of around 1.3 billion euros, instead of more than 1.8 billion euros.