Clothing & Shoes

Adidas Q1 profits drop almost 40%

The company expects to return to growth in Q2 despite a continued sales decline in Greater China and around a €200m (£171.22m) negative impact from supply chain constraints

Adidas has reported its operating profits dropped 38% year-on-year from €704m (£602.71m) to €437m (£374.13m) in the first quarter ending 31 March 2022 (Q1), due to its operating margin dropping 5% to 8.2%.

Income-before-tax also dropped 38.5% to €411m (£351.87m) in Q1, compared to €669m (£572.75m) in the same period in 2021. The company also reported a sales drop of 3% as supply constraints reduced growth by €400m (£342.45m).

Overall, Adidas saw Western markets grow with combined revenues in all Western markets increasing 13% in Q1, with double-digit increases in North America at 13%, 9% across EMEA and 38% across Latin America.

However, the company faced challenges on both supply and demand. Particularly, sales in EMEA were most impacted by the supply shortages, with more than half of the total negative impact recorded in this particular market.

Additionally, in the East, Adidas continued to face a “challenging” market environment as a result of Covid-related lockdowns in Vietnam and Greater China. Consequently, revenues in Greater China decreased 35%, and 16% in Asia-Pacific.

Meanwhile, Adidas’ net income from continuing operations dropped 38.2% year-on-year from €502m (£429.77m) in 2021 to €310m (£265.4m).

Looking ahead, the company expects to return to growth in Q2 despite a continued sales decline in Greater China and around a €200m (£171.22m) negative impact from supply chain constraints.

In Q2 2022, net sales are expected to grow more than 20% driven by unconstrained supply combined with the “strong momentum” in Western markets, growing demand in Asia-Pacific, as well as major sporting events.

Kasper Rorsted, Adidas CEO, said: “Backed by an exceptionally strong wholesale order book and relentless focus on driving growth in our own DTC channels, we expect this positive development to continue for the rest of the year.

“We will return to growth in Asia-Pacific in the second quarter, while we expect the challenging market environment in Greater China to continue. With strong double-digit growth in the vast majority of our markets, representing more than 80% of our business, we are well positioned for success in 2022.”

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