By Emma-Victoria Farr
FRANKFURT (Reuters) -German sporting goods maker Adidas on Thursday cut its full-year guidance, citing weaker expectations for China, lower demand in major Western markets and one-off expenses related to its exit from the Russian market.
The company now expects currency-neutral revenues to grow by a mid-single-digit percentage in 2022, down from a mid- to high-single-digit percentage forecast previously, while its operating margin is seen at 4%, down from 7%.
The company blamed a “further deterioration of traffic trends in Greater China, as well as a significant inventory build-up as a result of lower consumer demand in major Western markets since the beginning of September”, it said.
Adidas Frankfurt-listed shares fell 4.3% following the announcement.
The new outlook reflects one-off costs of around 500 million euros ($490 million) on its net income in 2022, Adidas added, saying these expenses were largely due to the company’s decision to initiate the wind-down of its Russian business.
Adidas’s third-quarter sales increased 11% to 6.4 billion euros, but its net income for the full year is expected to reach 500 million euros, compared with its previous estimate of 1.3 billion euros.
Currency-neutral sales in Greater China declined by a double-digit percentage due to continuing COVID-related restrictions, as well as significant inventory takebacks, the company said.
With measures in place to protect the company’s profitability, Adidas expects to generate a positive profit contribution of around 200 million euros in 2023.
The change in outlook comes after the company announced on Oct. 6 that it had put its business partnership with rapper and fashion designer Kanye West under review.
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(Reporting by Emma-Victoria Farr; Editing by Christoph Steitz and Aurora Ellis)