Adidas, the German sportswear company, has experienced a sharp decline in operating profit for the second quarter of this year. Despite a modest increase in currency-neutral sales, the company faced several obstacles including ceasing operations in Russia, higher supply chain costs, and COVID-19 lockdowns in China and Vietnam.

In light of these challenges, Adidas has revised its outlook for 2022, pointing to a slower-than-expected recovery in China as the reason. The company now projects currency-neutral revenues to grow at a mid- to high-single-digit rate for the year. Initially, Adidas had anticipated net income from continuing operations to reach around €1.3 billion, but this figure has been lowered from the previous range of €1.8 billion to €1.9 billion.

Last month, an unscheduled statement revealed that efforts to clear excessive inventories in the Chinese market will impact margins for the remainder of the year. Such developments have raised concerns among analysts who are critical of Adidas’ performance. Darcey Jupp, an apparel analyst at GlobalData, believes that Adidas is trailing behind its competitors and failing to resonate with consumers. While the brand has demonstrated growth compared to the first half of 2019, its rival Puma has experienced a much more substantial increase. Jupp attributes Adidas’ struggles to its lackluster core collection and missed opportunities to capitalize on key trends, something Nike has successfully achieved.

One area where Adidas has been particularly weak is in Greater China. Sales have been significantly affected by lockdowns in the country, and the potential for future closures has led the company to lower its expectations. A double-digit decline in China for the fiscal year 2022 is now anticipated. This underperformance is a setback for Adidas, as it had previously identified Greater China as a crucial region for expansion. However, the company has faced difficulties in the form of China’s zero-COVID policy, boycotts, and a growing aversion towards Western products.

Overall, the second-quarter results highlight the numerous challenges and headwinds that Adidas has faced. With a decline in operating profit and a revised outlook, it is apparent that the company must work to regain momentum and improve its performance in key markets.

For more information on Adidas’s Q2 results, please visit:
MarketWatch: Adidas Q2 operating profit falls 28% on Russia closure, higher supply chain costs
BBC News: Adidas profits hit by business suspension in Russia and pandemic restrictions in China and Vietnam