After the weak Corona year, the sporting goods manufacturer initially grew significantly again in 2021. However, like the competition, Adidas has also recently caused problems in the supply chain. There are also problems in the important Chinese market. Due to disagreements between China and the Western world, including on the subject of human rights, there were calls for a boycott of Western brands last spring, which is still having a massive impact on demand today.
As a result, the management around CEO Kasper Rorsted became more cautious when presenting the nine-month figures in November. In the third quarter, a corona-related lockdown in Vietnam also interrupted production in the world’s most important shoe manufacturing country. Adidas had promised that this could cause problems into the first quarter.
This and the higher costs for raw materials and logistics also had a dampening effect for the year as a whole. Adidas had actually announced 9.5 to 10 percent for the operating margin for 2021 and 1.4 to 1.5 billion euros for profit from continuing operations. Most recently, management had stated that it was aiming for the lower end of expectations. The gross margin should be between 50.5 and 51 percent.
Rorsted also said in the fall that sales are likely to stagnate in the fourth quarter, meaning that Adidas is more likely to achieve currency-adjusted growth of less than 20 percent for the full year. The CEO assumed an increase of 17 to 18 percent. Previously, Adidas had spent up to 20 percent increase in sales. Overall, the group forecast sales burdens of 1.6 billion euros due to the bottlenecks.
The focus of interest is likely to be the further development at Adidas. Here, the Ukraine war hovers like the sword of Damocles over the sporting goods manufacturer. Like local rivals Puma and Nike, Adidas is temporarily closing its stores in Russia and suspending online trading there. The company had already suspended its partnership with the Russian Football Association at the beginning of March.
Adidas also issued a medium-term forecast up to 2025 last year. According to this, sales should increase by an average of 8 to 10 percent per year from 2021 to 2025, adjusted for currency effects. The share of direct sales in sales should rise to around 50 percent of total revenues, and e-commerce sales should double to 8 to 9 billion euros. Profitability is also expected to increase significantly: In addition to a significant increase in margins, Adidas expects profits from continuing operations to increase by an average of 16 to 18 percent annually. In addition to the European region (EMEA), the management focused on North America – and China.
Gloomy outlook for the fourth quarter
Analysts expect a weak fourth quarter. In a consensus put together by Adidas, market observers expect a slight increase in sales to 5.2 billion euros after 5.1 billion euros in the same period of the previous year. Adjusted for currency effects, there is likely to have been a slight decline of one percent. The higher costs are likely to have had a significant impact on the operating margin. Profit from continuing operations is likely to have fallen from 143 million to 61 million euros.
For the year as a whole, the market experts expect a significant increase in sales and profits, but remain comparatively cautious. On average, they expect sales of 21.3 billion euros. The currency-adjusted increase is likely to be 17 percent, which is at the lower end of Adidas’ expectations.
Even with profit from continuing operations, which no longer includes the US brand Reebok, which has since been sold, they also expect a result of 1.4 billion euros at the lower end of the range issued by the company. In the previous year, Adidas had only achieved 461 million euros due to the corona losses. The shareholders should be happy about a higher dividend: The analysts are expecting EUR 3.20 per share, after EUR 3.00 in the previous year.
For the current year, the analysts recently expected further growth. However, the forecasts should be treated with caution, as they do not reflect the possible effects of the Ukraine war and were made before the war broke out. Overall, the analysts are already assuming a slowdown in growth dynamics and forecast sales of around EUR 23.4 billion and a currency-adjusted increase of nine percent. As a result, margins should improve slightly. They saw profits from continuing operations increase to around 1.8 billion euros. (dpa)