Adidas: Chinese “zero Covid” trips up Nike’s great opponent

The Chinese colossus stumbles Adidas. The sports equipment manufacturer posted sharply degraded results despite sales up slightly for the first six months of the year. The fault, according to him, to health restrictions in China, a country that has become a major for the German brand.

Despite an increase in turnover of 5.3%, to 10.9 billion euros, Adidas saw its operating profit fall by 33.6%, to 828 million euros, while its gross operating surplus sank by almost 40%, to 711 million. Finally, to crown this catastrophic first half, the brand with the three stripes posted a net profit down 24.6%, to 671 million euros.

Chinese confinements

Like its most famous competitor, Nike – which still managed to end its staggered annual financial year ended at the end of June on a sharp rise – the German group blames the successive confinements in China. Highly exposed to the country, the equipment manufacturer achieves around “3 billion euros in sales” per year, according to its boss.

In the eyes of Kaspar Rorsted, this is the “greatest challenge” facing the brand today. “We are still seeing very cautious consumer behavior with the imminent risk of further lockdowns,” he said on a conference call. Blocked at home, the Chinese are restrained in their sporting desires – and therefore consume less equipment.

In the former Middle Kingdom, sales of the German group collapsed by nearly 35%, to only 1.7 billion euros, during the first six months of the year. And the future does not look better: in July, Adidas again recorded a decline of 21% in directly owned stores and a similar trend among franchisees. It must be said that 80 cities in China are still “partially affected by the confinements”, estimates Kaspar Rorsted.

Given the importance of the Chinese market (nearly 16% of total sales in the first half), the group lowered its annual forecasts from the end of July. It is only counting on a growth of 5 to 10% of its global sales, against 11 to 13% previously. Adidas also expects an operating margin “around 7%”, against 9% previously announced. And a net profit of 1.3 billion, against 1.8 to 1.9 billion expected so far.

Stay “optimistic”

Adidas, however, remains “optimistic” about the picture of his brand and the “long-term growth prospects” in China, assured Kaspar Rorsted. The inventor of the Stan Smith suffered a 2021 boycott by local consumers after the German pledged in 2020, along with other brands, not to buy Xinjiang cotton amid labor allegations forced from Uyghurs.

On the other hand, “it is too early to say whether the current increase in tensions between China and the West due to Nancy Pelosi’s visit to Taiwan will have an impact on the Chinese consumer”, explained the boss of the equipment manufacturer. German. Blocking trade routes passing near the island due to Chinese military maneuvers in the region, does not facilitate the logistics of groups, including Adidas.