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Adidas Cuts 2022 Outlook on Slower China Recovery, Potential for a Global Slowdown

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  • Adidas on Tuesday cut its financial forecast for 2022 as the sneaker and athletic brand suffers from a slower recovery in China.
  • The company also warned of the potential for a slowdown in other markets.
  • The announcement comes a day after Walmart sent shock waves across the retail sector

Adidas on Tuesday cut its financial forecast for 2022 as the sneaker and athletic brand suffers from a slower recovery in China and warned of the potential for a slowdown in other markets.

The announcement comes a day after Walmart sent shock waves across the retail sector when it cut its quarterly and full-year profit guidance. Walmart said inflation is causing shoppers to spend more on necessities such as food and less on items like clothing and electronics.

Adidas said Tuesday that it now expects revenue in Greater China to decline at a double-digit rate for the remainder of the year, given continued widespread Covid-related restrictions in the region. It also said it will have to work to clear excess inventories through the end of the year, and those efforts will weigh on profits.

The Germany-based retailer now forecasts total currency-neutral revenues for the company to grow at a mid-to-high single-digit rate in 2022, compared with previous growth estimates of between 11% to 13%.

Adidas now expects its gross margin to be around 49% in 2022, down from prior guidance of 50.7%, and net income from continuing operations to reach around 1.3 billion euros, down from a prior range of 1.8 billion euros to 1.9 billion euros.

Adidas noted that while it has not experienced a meaningful slowdown in sales nor significant cancellations of wholesale orders in any other market, its adjusted outlook is accounting for a potential slowdown of consumer spending globally.

More and more retailers are sounding the alarm with inflation growing at the fastest pace in four decades. With consumers confronting higher prices at the gas pump, grocery store and restaurants, some are being pickier about where they're spending money and where they're pulling back. Kohl's, Gap, Bath & Body Works and Bed Bath & Beyond issued profit warnings in the past few weeks.

Adidas had already once tempered its expectations for 2022 with lockdowns in Greater China hitting the sportswear retailer earlier in the year. It comes after the company's sales in the region were hurt in 2021 amid a consumer boycott of Western brands.

Find the full press release here.

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