Adidas lowers its profit target as sales in China fall

Adidas (OTC:ADDYY) lowered expectations for 2022 after a slump in the first quarter, as COVID-19 lockdowns in Greater China continued to plague the colossal German sportswear company.

On Friday, first-quarter currency-adjusted sales shrank by 3% worldwide, to 5.3 billion euros, while profit from continuing operations fell 38%, to 310 million euros.

In Greater China, sales collapsed by 35% in the first quarter for the year. Revenue is expected to fall dramatically due to store closures.The company now expects to come at the lower end of its 2022 forecast for an 11-13% increase in currency-neutral sales as well as for net income from continuing operations of between 1.8 and 1.9 billion euros.

The company also cut its operating margin forecast, saying it will remain at the previous year’s level of 9.4% instead of increasing to 11%.

Chief Executive Kasper Rorsted highlights that ‘’in this environment, characterized by severe external challenges, it is imperative to stay focused on our strategic objectives’’.

The German company expects a return to growth in the second quarter despite the continued sales decline in Greater China, and a 200 million euro negative impact from supply chain constraints.

In the second half of 2022, it is expected that net sales will grow over 20%, driven, among other things, by unconstrained supply, strong momentum in Western markets.

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