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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