The halt in sales in Russia cut Adidas' revenue in the 2nd quarter by 100 million euros
04.08.2022 300

The halt in sales in Russia cut Adidas' revenue in the 2nd quarter by 100 million euros

Quarantine in China and store closures in Russia are having a negative impact on Adidas' business. The German brand said on Thursday that currency-adjusted sales rose 4% in the second quarter, although net income fell to 360 million euros (or $367 million). Operating income fell to 392 million euros ($398 million) from 543 million euros ($553 million) in 2021.

Adidas shares rose more than 2% on Thursday morning.

Adidas CEO Kasper Rorsted said that the macroeconomic situation in China has prevented the company from recovering in this market. Just last week, Adidas cut its forecast for 2022, citing a slower recovery in China due to ongoing Covid-19 restrictions. The company said it expects revenue in Greater China to decline at a double-digit rate through 2022.

“The recovery in this market — due to ongoing COVID-19-related restrictions — is slower than expected,” Rorsted said. In Greater China, sales fell 35% in the second quarter.

In China, Adidas is looking to connect with local Chinese consumers through local marketing promotions, partnerships with Chinese athletes, and the launch of a lifestyle shoe collection designed for the domestic market.

Outside of China, Adidas has faced hurdles due to supply chain issues following restrictions imposed in Vietnam last year that impacted revenue growth of around 200 million euros ($203 million) in the second quarter. The company's decision to suspend all retail and online sales in Russia in the second quarter reduced revenue by more than 100 million euros ($102 million).

Adidas said it expects discounts to increase in the second half of the year, especially in Greater China, as the company looks to shed excess retail inventory.

Rorsted also noted a "potential slowdown in consumer spending" in other markets, which could persist until 2022.

“So far, we have not experienced a significant slowdown in sales of our products,” Rorsted said. “We have also not experienced significant bulk order cancellations in any other Greater China markets, but we clearly need to be prepared for the fact that the situation may change within of the year".

Quarantine in China and store closures in Russia are having a negative impact on Adidas' business. On Thursday, the German brand reported that second-quarter currency-adjusted sales rose 4%,…

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