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Adidas expects Russia hit in 2022, but China recovery – Metro US

Adidas expects Russia hit in 2022, but China recovery

Adidas store at the Woodbury Common Premium Outlets in Central
Adidas store at the Woodbury Common Premium Outlets in Central Valley, New York

BERLIN (Reuters) -Adidas warned of a hit to sales from closing operations in Russia and COVID disruptions in Vietnam but a brighter China outlook helped send the German sportswear group’s shares 10% higher on Wednesday.

The company operates about 500 stores in Russia, a quarter of its total, which it said on Monday it had closed along with online sales there.

For 2022, Adidas forecast an 11-13% increase in currency-neutral sales, including the risk to its business in Russia and Ukraine, with Greater China set to see sales increase in the mid-single digits after a consumer boycott in 2021.

The closure of factories in Vietnam due to COVID-19 means a shortage of products will cut first-quarter sales by 600 million euros ($658 million) before a strong rebound from the second quarter, CEO Kasper Rorsted told journalists.

Adidas shares traded up 10.2% at 1030 GMT, helped by the relatively upbeat outlook for 2022, especially for China, with analysts noting the earnings forecast was ahead of consensus expectations.

“The tone appears more constructive here than Puma was a couple of weeks ago,” said Jefferies analyst James Grzinic.

Puma said last month it expected sales to grow at least 10% in 2022 and cautioned that a consumer boycott in China and cost pressures would limit profit growth.

Adidas said the Ukraine crisis posed a risk to sales of up to 250 million euros, about half its revenue in the region in 2021, or about 1% of total group sales.

Adidas had already recorded sales of about 100 million euros in the region prior to closing its stores and could make a further 100 million if it resumes operations in Russia or if it shifts products to other markets, finance chief Harm Ohlmeyer said.

Adidas has not seen a broader impact on consumer confidence from the Ukraine crisis and is sticking to its medium-term targets, Rorsted said, noting that the sporting goods industry is usually resilient during times of financial turmoil.

Adidas fourth-quarter sales fell 24% in Greater China, where it said on Tuesday it has appointed Adrian Siu as its new head of the regional business. Siu joined Adidas in 2002 in Hong Kong but left in 2019 to head Chinese brand Cosmo Lady.

Rorsted said he expected sales to start growing in China from the second quarter, noting the company had signed up local athletes and was making a drive to design more products especially for China to compete with local brands.

The company was targeted during a boycott of Western brands by Chinese consumers who criticised companies for saying they would not source cotton from Xinjiang after reports of human rights abuses there. Beijing denies any abuses.

($1 = 0.9121 euros)

(Reporting by Emma Thomasson; editing by Jan Harvey and Jason Neely)