German sportswear giant Adidas continues to suffer from setbacks and has lowered its guidance for the second time this year.
Operating profit is now also expected to be lower, coming in at around 500 million euros when the original forecast was for about 1.3 billion euros.
Adidas put the blame on a number of factors. Up until the COVID-19 pandemic, the second-largest sportswear brand in the world had made roughly a third of its sales in each of three main territories: Europe, the Americas and China.all year due to pandemic-related lockdowns and a consumer boycott of Western brands. During the first quarter, revenues out of China dropped 35 percent and that double-digit decrease has continued throughout the second and third quarters too.
Market analysts suggested that business in China might never return to its previous heights. Earlier this year, Adidas chief executive officer Kasper Rorsted had not felt the same way. After the first-quarter drop, he had insisted that, “in the future, you will see a growth economy in China [again],” and argued that while the lockdown was a problem, it could also be part of the solution, boosting sales when it ended.
At the same time, Adidas also said consumer demand in its other markets had been lower than expected from September onward and that, despite double-digit growth in those regions, it was now dealing with a build-up of inventory. This would eventually translate to more discounting, worse margins and less money coming in.
In a statement, Adidas also noted costs of 300 million euros involved in the complete wind down of its Russia business, which it now says is irrecoverable.
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