By Joshua Kirby 
 

Supply-chain squeezes coupled with a tough demand environment in Asia, and especially China, acted as a major drag on Adidas's third-quarter revenue, leading to downbeat comments on full-year targets from the German sportswear company.

Quarterly revenue took a hit of around 600 million euros ($696 million) from what Adidas described as the challenging environment in Greater China, coronavirus-related lockdowns in the wider Asia region, and supply disruption hitting the industry as a whole, it said.

The company booked third-quarter revenue of EUR5.75 billion, in line with analysts' expectations and only a slight organic increase compared with the same period the previous year.

Amid lockdown-related lockdowns and travel restrictions, revenue in Greater China fell 15% on year, with Asia-Pacific as a whole booking an 8% decrease, Adidas said. This was to some extent offset by good growth in North America, and the Europe, Middle East and Africa region. However, the unfavorable geographic mix and higher supply costs weighed on the company's gross margin, which fell 0.2 percentage points to 50.1%.

Adidas's demand and supply problems look set to continue into the final quarter. The company confirmed full-year targets on sales and earnings, but said it now expects to reach the lower end of guidance of up to 20% organic-sales growth. As such, the company also expects to reach only the lower ends of a targeted operating margin of between 9.5% and 10% and net income from continuing operations of EUR1.4 billion-EUR1.5 billion.

Meanwhile, the company lowered its gross-margin target for 2021 to between 50.5% and 51%, from around 52% previously, amid "significantly higher" supply-chain costs, as well as a less favorable market mix.

 

Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby

 

(END) Dow Jones Newswires

November 10, 2021 02:57 ET (07:57 GMT)

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