Clothing & Shoes

Adidas lowers full year forecast as Q2 profits drop 27.9%

The company’s decision to suspend operations in Russia reduced revenues by more than €100m (£83.7m) in the quarter

Adidas has reported that its operating profits dropped 27.9% year-on-year from €543m (£454.5m) to €392m (£328.1m) in the second quarter ending June 30 2022 (Q2 FY22), following the suspension of operations in Russia, Covid-related lockdowns in Greater China, and higher supply chain costs.

Consequently, Adidas has adjusted its FY22 guidance, with expectations for total group revenues to grow at a mid-to-high single-digit rate in 2022. Previously, expectations were at the lower end of the 11% to 13% range.

Net income from continuing operations is now expected to reach €1.3bn (£1.08bn) which was previously at the lower end of the €1.8bn (£1.5bn) to €1.9bn (£1.59bn) range.

However, the company has increased forecasts for North America and Latin America, with North America revenues now expected to increase in the high teens. Sales in Latin America are projected to grow between 30% and 40%, and both were previously forecast for mid-to high-teens growth.

All in all, revenues increased 4% in Q2 FY22, which was led by Western markets, although net income declined 7% year-on-year from €387m (€323.9m) to €360m (£301.3m), and Adidas suffered a €300m (£251.13m) negative impact from macroeconomic constraints.

Supply chain constraints following last year’s lockdowns in Vietnam reduced top-line growth by €200m (£167.4m) in the quarter, and the company’s decision to suspend operations in Russia reduced revenues by more than €100m (£83.7m) in the quarter.

Revenues in North America increased 21% to €1.7bn (£1.4bn), and revenues in Latin America increased 37% to €514m (£430.2m). Asia-Pacific returned to growth with revenue growth of 3% to €550m (£460.4m) despite still being impacted by limited tourism activity in the region.

Meanwhile, Greater China revenues fell 35% to €719m (£601.8m) in Q2, which is in line with previous expectations.

Overall, Adidas’ revenue development was strongest in Football, Running and Outdoor, which all grew 10% to €5.59bn (£1.42bn) in the second quarter, compared with € 5.07bn (£4.25bn) in Q2 FY21.

Kasper Rorsted, Adidas CEO, said: “Our Western markets continued to show strong momentum in the second quarter amid heightened macroeconomic uncertainty. With Asia-Pacific returning to growth, markets combined representing more than 85% of our business grew at a double-digit rate.

“We have to take into account a potential slowdown in consumer spending in all other markets for the remainder of the year.”

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