The German sporting goods supplier Adidas AG was able to achieve strong growth in sales and earnings in the 2021 financial year. Despite the additional burdens resulting from the Russian invasion of Ukraine, a double-digit increase in sales and higher profits are expected for the current year, the company announced on Wednesday.
The past year was characterized by the recovery from the consequences of the Covid-19 pandemic, which had severely affected business in 2020. Sales from continuing operations – i.e. excluding the share of the Reebok brand, which has since been sold – rose by 15.2 percent to 21.2 billion euros compared to the previous year. Adjusted for exchange rate changes, the growth rate was 16 percent, according to the company.
Strong growth in Europe and America boosts annual sales
Persistent problems in some markets prevented an even more significant increase: “Overall, the challenging market environment in China, extensive lockdowns in connection with Covid-19 in Asia-Pacific and industry-wide disruptions to the supply chain saw sales growth for the full year by over 1.5 billion euros subdued,” explained Adidas.
The Group was able to grow particularly strongly in Europe and America. In the EMEA region, which includes Europe, the Middle East and Africa, sales from continuing operations grew by 23.0 percent (currency-adjusted +24.0 percent) to 7.76 billion euros, in North America by 13.0 percent (currency-adjusted +16.6 percent) to 5.11 billion euros and in Latin America by 39.8 percent (currency-adjusted +47.2 percent) to 1.45 billion euros. In China, on the other hand, revenues increased by only 5.9 percent (currency-adjusted +3.0 percent) to 4.60 billion euros, in the rest of the Asia-Pacific region they were 2.18 billion euros and thus by 4.7 percent (currency-adjusted +7.7 percent) above the previous year’s level.
After the recent jump in profits, the group is increasing the dividend
Thanks to the significant increase in sales “in combination with the improved gross margin and the lower expenses from operating activities as a percentage of sales”, the group achieved a strong jump in profits. Operating profit from continuing operations reached EUR 1.99 billion and more than doubled (+166.3 percent) compared to the previous year’s figure of EUR 746 million, net profit from continuing operations even more than fell to EUR 1.49 billion three times as high as in 2020 (+223.4 percent).
Reported net income attributable to shareholders, which also includes contributions from Reebok, jumped from EUR 432 million to EUR 2.12 billion (+389.6 percent). In view of the significant improvement in earnings, the annual dividend is to be increased by ten percent to EUR 3.30 per share.
In the fourth quarter, Adidas will experience the expected setback due to delivery bottlenecks
However, as expected, the upswing came to a halt in the fourth quarter. “Significant supply bottlenecks as a result of the lockdowns in Vietnam last year, the challenging market environment in China and lockdowns related to Covid-19 in Asia-Pacific reduced sales growth by more than EUR 400 million in the fourth quarter of 2021,” the company admitted.
At EUR 5.14 billion, sales in the period from October to December were therefore slightly below the corresponding level of the previous year (-0.1 percent, currency-adjusted -3 percent). Profit from continuing operations fell by 13.8 percent to 123 million euros.
Overall, CEO Kasper Rorsted was satisfied with the figures presented: “In the 2021 financial year, we achieved very good results despite a large number of external factors that weighed on supply and demand throughout the year,” he said in a statement. “In markets that have not experienced major disruptions, we have delivered strong sales momentum, as evidenced by double-digit sales increases in EMEA, North America and Latin America.”
Despite the Ukraine war, the company forecasts double-digit growth in sales and profits for 2022
Despite the additional burdens resulting from the Russian attack on Ukraine, the CEO was confident about the coming months: “In 2022 we will build on this momentum and – despite increased uncertainty – continue to increase both our sales and our profit in the double-digit percentage range,” so Rorsted.
Specifically, Adidas expects currency-adjusted sales growth of eleven to 13 percent for 2022. “This growth forecast already includes up to €250 million at risk from the Russia/CIS business – representing around 50 percent of the company’s total revenues in the region – due to the war in Ukraine and reflects the company’s decision to continue operations of its to stop doing business and its online trade in Russia until further notice,” the group announced.
In addition, management expects a significant improvement in the operating margin from 9.4 percent last year to 10.5 to 11.0 percent. Therefore, the company forecast an increase in profit from continuing operations to 1.8 to 1.9 billion euros.