Adidas Raises Sales Forecast as Sporting Events Revive
Adidas AG surged after the German company raised its sales forecast due to a rebound in China and online sales ahead of the expected return of mass sporting events.
Currency-neutral sales will grow by a percentage in the high teens this year, the upper end of its previous projection, the Germany company said Friday. It predicted second-quarter revenue growth of about 50%. The shares rose as much as 8.8%.
The guidance should ease concern investors have had since consumers in China boycotted Adidas -- along with rival Nike Inc. and others -- for taking a stance against forced labor in the Xinjiang region. Adidas supported the Better Cotton Initiative in its decision to no longer certify cotton that comes from Xinjiang.
Adidas sales fell “significantly” in China both online and in stores starting in late March, though demand has been picking up “slowly but steadily” in recent weeks, Chief Executive Officer Kasper Rorsted said on a call with reporters Friday. It’s too soon to say how much the boycotts will hurt second-quarter earnings, but Rorsted expects a “very, very strong” year in China.
“We have, to the extent possible, engaged in dialogue with them in a respectful way, respecting their tradition and culture,” Rorsted said of Chinese consumers. “That has initially been somewhat constrained because of where the situation was, but it is more normalizing now.”
Adidas impressed investors in March with a plan to focus on online sales, products for women and use of recycled materials in shoes and apparel. Those areas appear to be gaining ground, with first-quarter sales increasing in China, Europe and North America.
The company is looking to build on that momentum in coming months, with the release of products including a version of the classic Stan Smith tennis shoes made of a more sustainable, mushroom-based material. It also plans to capitalize on the return of major sports events, including the European and South American soccer championships and the Tokyo Olympics, Rorsted said.
First-quarter operating profit reached 704 million euros ($849 million), beating analysts’ estimates.
Another hot topic is how much Adidas will be able to sell the Reebok brand for in coming months. It’s looking to close that deal by year-end, the company said. That could set a metric in the industry as Swiss sports-shoe maker On AG is preparing for a potential listing that would value the business at about $5 billion, Bloomberg reported last week.
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