People walk past an Adidas store in a shopping district following an outbreak of the coronavirus disease (COVID-19) in Beijing, China, April 5, 2021. (REUTERS/Thomas Peter)
Adidas AG warned that unsold goods are piling up as consumer demand weakens across China and western markets, prompting a fresh profit warning from the sneaker maker.
The German company said it now expects an operating margin of 4% this fiscal year, down from a prior forecast of 7%. Its full-year revenues will grow at a mid-single-digit rather than mid- to high-single-digit rate.
The warning extends a run of bad news from Adidas. Earlier this month the company put its relationship with Kanye West, called Yeezy, under review amid growing acrimony and erratic behavior from the hip-hop icon and designer.
In August, the company said Chief Executive Officer Kasper Rorsted will step down next year, following an earlier profit warning in July.
Adidas said the more bearish outlook reflects a deterioration in store traffic trends in Greater China and a slowdown in demand in western markets since September, which is likely to lead to an overhang of stock that will have to be discounted.
The company’s American depositary receipts fell as much as 5% after the update, with shares of rival Nike Inc. down 0.8% in New York.
Adidas had already flagged weakness in China in its July warning. The country was once the brand’s biggest growth engine, but consumer boycotts and Covid restrictions have dented sales.
Surging inflation across western markets has crimped consumer spending power.
The company is also taking a series of one-time costs related to issues such as the winding down of its operations in Russia.
