Adidas Report Greater China Revenue Down 35%

On May 6, Beijing time, Adidas (addyy. US) disclosed its first quarter performance report of fiscal year 2022. Affected by supply chain constraints and epidemic blockade measures in Greater China, Adidas's sales and profits in the first quarter of this year both fell year-on-year: revenue of 5.302 billion euro, ignoring the exchange rate factor, a year-on-year decrease of 3%; Net profit attributable to parent company decreased by 13.6% to 482 million euro.  

Adidas CEO Kasper rorsted said in the financial report that in the first quarter, Western consumers' demand for brand products was relatively strong, with total sales in North America, Europe, the Middle East, Africa and Latin America growing at a double-digit rate. Especially among them Latin America grew the fastest, up 38% year on year ； North America and Europe, the Middle East and Africa (EMEA) increased by 12.8% and 9.1% respectively year-on-year.  

For the Asia Pacific region, due to the impact of the blockade measures brought about by the epidemic in Greater China and other regions, Adidas's revenue fell by 15.34% in the Asia Pacific region In the second quarter, rorsted expects a challenging market.   

Source: adidas Quarterly Report

In the first quarter of this year, due to the blockade of Vietnam, Adidas's supply chain was limited and faced with the problem of supply shortage. The company began to give priority to its own DTC channel. As of March 31, Adidas DTC revenue increased slightly by 1% compared with the same period of last year, but increased by 33% compared with the same period in 2020.  

In terms of categories, the income growth of Adidas football and outdoor categories was the strongest, both with double-digit growth rate. In addition, the sales of Adidas's latest product innovations (ultraboost 22 and Adistar) and the expansion of solar franchise with the launch of solarglide have led to high single digit growth in run related sales.  

In the financial report, Adidas made a forecast on the revenue and profit prospects of 2022, reducing the revenue growth to 11%, which was mostly 11% - 13% before; However, due to the significant decline in China's large regional sales volume in 2022, it is expected that a substantial decline in China's revenue will still be brought about by the strong decline in China's large regional stores in 2022.  

The lower than expected revenue forecast in Greater China will also lead to adverse market mix of the company. Adidas expects that the gross profit rate and operating profit margin of the company will not increase this year, but will hover at 50.7% and 9.4% last year; Previously, the company's target was to increase gross margin to 51.5% - 52.0% and operating profit margin to 10.5% - 11% in 2022.