Adidas reports £342m lost in sales due to supply constraints
In its Q1 results for 2022 Adidas has revealed that supply constraints resulting from last year's lockdowns in Vietnam as well as "challenges" in demand have caused currency-neutral sales to decrease by 3%, in turn reducing its top-line by £342 million.
The sportswear brand, however, confirmed it will meet the previously announced outlook for revenue and net income in 2022 but warned it will be "at the lower end" due to impact of COVID-19-related lockdowns in Greater China.
Results for Q1:
- Currency-neutral sales down 3%, reducing top-line by £342 million
- Gross margin down to 49.9% driven by "significantly higher supply chain costs"
- Other operating expenses were up 10% to £1.93 billion
The brand highlighted that sales in the EMEA region experienced the highest supply shortages, recording "more than half of the total negative impact." Revenues in this region grew 9%, compared to 13% in North America and 38% in Latin America.
In Greater China revenues fell by 35% "amplified" by COVID-19-related lockdowns, while in the Asia-Pacific region sales decreased by 16%. According to Adidas the "strong underlying momentum" in its Western markets and expected return to growth in Asia-Pacific will compensate for the decline in Greater China.
Adidas forecasts that net income from continuing operations will reach the lower end of the previously announced range of between £1.54 billion and £1.63 billion. In the second half of the year net sales are to grow by more than 20% driven by "unconstrained supply" and "strong" Western momentum.
Adidas CEO Kasper Rorsted commented: “In this environment, characterised by severe external challenges, it is imperative to stay focused on our strategic objectives. While we will remain agile, we will not jeopardise our long-term growth opportunity for short-term profit optimisation.
"We will continue to invest into our brand and partnerships, into our DTC business and digital capabilities to support top-line acceleration and market share gains in our growth markets in 2022.”