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Adidas sees operating profit fall 28% in Q2

Tom Shearsmith
04 August 2022

Adidas has reported that operating profit fell by 28% in the second quarter to £326 million ($398.43 million), as the company suffered from suspending business in Russia, higher supply chain costs and COVID-19 lockdowns in China and Vietnam.

The German sportswear retailer said currency-neutral sales rose 4% in the quarter but net income from continuing operations declined to £301 million from €323 million in the same period last year.

Within DTC, e-commerce, which now represents more than 20% of the company’s total business, showed double-digit growth reflecting strong product sell-through. From a category perspective, revenue development was strongest in the company’s strategic growth categories Football, Running and Outdoor, which all grew at strong double-digit rates.

Revenue growth in the second quarter was driven by Western markets despite last year’s lockdowns in Vietnam still reducing sales, particularly in EMEA and North America. In addition, the top-line development in EMEA was also :impacted by the loss of revenue in Russia/CIS" of more than £83 million.

Revenues in North America increased 21% during the quarter driven by growth of more than 20% in both DTC and wholesale. Revenues in Latin America increased 37%, while Asia-Pacific returned to growth.

The company continued to face a challenging market environment in Greater China, mainly related to the continued broad-based COVID-19-related restrictions. As a result, currency-neutral revenues in the market declined 35% during the three-months period, in line with previous expectations. Excluding Greater China, currency-neutral revenues in the company’s other markets combined grew 14% in Q2.

Kasper Rorsted, Adidas CEO, commented: “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.

“With sports back at centre stage this summer, revenues in our strategic growth categories Football, Running and Outdoor all increased by double digits. However, the macroeconomic environment, particularly in China, remains challenging. The recovery in this market is – due to continued COVID-19-related restrictions – slower than expected. And we have to take into account a potential slowdown in consumer spending in all other markets for the remainder of the year.”

Last month, Adidas lowered its financial outlook for 2022, citing a slower-than-expected recovery in Greater China due to its COVID-19 pandemic restrictions. The company said it expects full-year net income from continuing operations to reach about £1.09 billion.

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