Adidas is the latest retailer to cut its outlook for 2022.
The German sportswear brand said on Tuesday that its recovery in Greater China had been slower than expected since the start of the third quarter, due to ongoing Covid-19 restrictions. As such, Adidas said it expects revenue from Greater China to decline at a double-digit rate through 2022.
Adidas also expects total currency-neutral revenue to grow in the mid-to-high single digits in 2022. It previously expected at the lower end of the 11% to 13% range. Net income from continuing operations in 2022 is expected to be approximately €1.3 billion, updated from the previously estimated range of €1.8 billion to €1.9 billion.
In the first quarter, Adidas reported headwinds to its business due to lockdowns in China, with sales in the region falling 35% in the first quarter, due to Covid-19 challenges in the market. Throughout the pandemic, China has enforced a strict “zero-Covid” policy to fight COVID-19 outbreaks, which has led to prolonged strict lockdowns in various regions, such as Shanghai.
Adidas confirmed to FN in April that its more than 60 stores in Shanghai were temporarily closed. The company had previously said it expected a “significant decrease” in revenue in Greater China and a loss of 200 million euros due to supply chain issues.
Adidas said the slowdown was mostly limited to China, although the new forecast takes into account potential slowdowns in consumer spending in other markets due to conditions in the macro environment.
Walmart yesterday lowered its business outlook for the second quarter and the full year, citing inflation and excess inventory. According to Walmart, rising food prices have impacted customers’ ability to spend in other categories, leading to more markdowns to help eliminate excess inventory, particularly apparel.
From Tuesday afternoon, Shares of Target, Kohl’s and Macy’s were all down.
Last month, Target also cut its second-quarter guidance as it rolled out a plan to eliminate excess inventory with additional markdowns. Sales slowed in categories such as home, electronics, sporting goods and apparel as consumers spent more on essential categories such as food and drink.
Higher-than-usual inventories due to changing consumer habits amid inflation have also been a major issue for other retailers, especially as consumer prices hit highs. record. Executives at Target, Foot Locker, Macy’s and others said last quarter that they expected to see increased discounts as they sought to correct their high inventory levels.
Adidas is expected to release its second quarter results on August 4.