Despite the boycott in Russia, the war in Ukraine and ongoing problems in China, Adidas still believes 2022 will be a good year. Sales will rise by up to 13 %, even though the boycott in Russia could cost the company a quarter of a billion euros.
High price for Chinese cotton
Adidas is ready for 2022: Reebok has been sold, so the sportswear brand can now look after itself. Last year’s results instil confidence in the German brand: in 2021, sales increased by 15 % and profits almost quintupled. Whereas net profit melted away to 443 million euros in 2020, it now stood at over 2.1 billion euros. Due to increased freight costs and the shortage of sea containers, the gross margin of 50.7 % was, however, lower than expected (52 %).
Still, the all-important fourth quarter was not a high-flyer: turnover increased by only 3 %, mainly due to global supply chain problems and a boycott in China. Like several other major brands, such as H&M and big rival Nike, Adidas was hit hard in China when it banned cotton imports from China’s Xinjiang region. Western reports denounced the fact that Uighurs are put to work in punishment camps there, but Chinese consumers protested strongly.
Consumers and online retailers turned en masse to homegrown brands such as Anta Sports and Li-Ning, who made a point of continuing to use “local cotton”. Consequently, for two quarters in a row, Chinese sales of Adidas fell by about 15 %, in the fourth quarter this was even by as much as 24 %. To turn the tide, the German group has now appointed a new top executive in China, the Financial Times reports.
1 % of total turnover lost to war
The self-confidence of Adidas is striking, because the German sports brand admits at the same time that the year has started extra uncertainly. Together with many other Western brands, Adidas temporarily stops sales in Russia because of the war in Ukraine. The brand already budgets that this withdrawal could cost 250 million euros – or 1 % of all sales.
Nevertheless, the trainer manufacturer still expects sales to grow between 11 and 13 % this year. The gross margin is expected to be between 51.5 and 52 %, while the operating margin will be around 11 %. Profits should also grow by double digits this year, the company believes.
