Adidas Expects a Muted End to Year Amid Supply Squeezes, China Headwinds -- Update
10 November 2021 - 09:12AM
Dow Jones News
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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