Business

Adidas expects Russia to be hit in 2022 but China is recovering

Adidas Store at Woodbury Common Premium Outlets in Central Valley, New York
FILE PHOTO: Adidas signs are seen at their store at Woodbury Common Premium Outlets in the Central Valley, New York, U.S., on February 15, 2022. REUTERS/Andrew Kelly

March 9, 2022

BERLIN (Reuters) – German sportswear group Adidas expects a halt to its Russian operations due to the war in Ukraine to jeopardize up to 250 million euros ($273.1 million) in sales this year, it said on Wednesday but forecast an upswing in his China business.

The company announced on Monday that it had suspended operations in Russia — where it operates about 500 stores, a quarter of its total — including through its online shopping site.

Adidas forecasts currency-neutral sales growth of 11-13% in 2022, including risk for business in Russia and Ukraine, with Greater China expected to post mid-single-digit sales growth following a consumer boycott in 2021.

Its shares gained 7%, helped by the relatively optimistic outlook for 2022, particularly for China, with analysts noting earnings forecasts are ahead of consensus expectations.

“The tone seems more constructive here than it was at Puma a few weeks ago,” Jefferies analyst James Grzinic said.

Puma said last month it expected sales growth of at least 10% in 2022, warning that a consumer boycott in China and cost pressures would limit earnings growth.

Adidas said the €250 million at risk from the closures in Russia accounts for about half of the company’s total sales in the region and represents about 1 percentage point of growth for the entire company.

It expects net income from continuing operations to grow to between €1.8 billion and €1.9 billion in 2022, up from €1.492 billion in 2021.

Adidas posted a currency-neutral fourth-quarter sales decline of 3% to 5.137 billion euros, dragged down by a 24% decline in Greater China, where it announced on Tuesday that it had appointed Adrian Siu as its new head of regional business .

The company was targeted during a boycott of Western brands by Chinese consumers who criticized companies for not sourcing cotton from Xinjiang amid reports of human rights abuses there. Beijing denies any abuse.

($1 = 0.9154 euros)

(Reporting by Emma Thomasson; Editing by Paul Carrel, Miranda Murray and Jan Harvey)

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Caroline Bleakley

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