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Adidas cuts outlook, winds down Russia operations

By Prachi Singh

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Management

Image: Adidas store Barcelona

As a result of the deteriorating traffic trend in Greater China, higher clearance activity to reduce elevated inventory levels as well as total one-off costs of around 500 million euros on the net income level in 2022, Adidas has reduced its full year guidance.

The company has also confirmed that Adidas has initiated the wind-down of its business operations in Russia as the company believes that a resumption of operations is not possible for the foreseeable future.

The company has already taken initial steps in recent weeks to close its stores in the region and will wind-down its business in the coming months.

Adidas slashes 2022 forecast

Adidas now expects currency-neutral revenues to grow at a mid-single-digit rate in 2022 compared to the previous outlook of mid to high-single-digit rate, reflecting double-digit revenue growth during the fourth quarter.

The company’s gross margin is now expected to be around 47.5 percent in 2022 compared to around 49 percent previously and operating margin is now forecasted to be around 4 percent against around 7 percent.

Net income from continuing operations is expected to reach a level of around 500 million euros compared to the previous forecast of around 1.3 billion euros.

Adidas posts 4 percent revenue growth in Q3

Based on preliminary numbers, Adidas’ currency-neutral revenues grew 4 percent during the third quarter. In euro terms, the company’s sales increased 11 percent to 6.408 billion euros.

The company said, currency-neutral sales in Greater China declined at a strong double-digit rate reflecting the continued widespread Covid-19-related restrictions as well as significant inventory takebacks. Excluding Greater China, currency-neutral revenues in the company’s other markets combined continued to grow at a double-digit rate during the quarter.

The gross margin declined 1.0 percentage points to a level of 49.1 percent and operating margin reached 8.8 percent during the third quarter compared to 11.7 percent last year.

Net income from continuing operations was 179 million euros compared to 479 million euros in the third quarter of the previous year.

Adidas