German sportswear company Adidas said on Wednesday it expected a recovery in its China business, following its shake-up of management there and calling a halt to its business in Russia due to the war in Ukraine.
Adidas forecast an increase in currency-neutral sales of 11-13% for 2022, including the risk to its business in Russia and Ukraine, with China set to see sales increase in the mid-single digits after a consumer boycott in 2021.
It expects net income from continuing operations to grow 1.8-1.9 billion euros ($1.96-2.07 billion), up from 1.49 billion euros in 2021.
The company’s expectations helped Germany’s DAX jump 3.8% on Wednesday.
“Adidas’ shares were [also] helped by guidance for improved operating margins, but set the tone for many companies to come by quantifying the expected hit from halting business in Russia, which in its case is up to 250 million euros,” Russ Mould, investment director at AJ Bell, noted.
Adidas reported a 3% fall in currency-neutral sales in the fourth quarter to 5.137 billion euros, dragged down by a 24% fall in China.
Adidas lost market share in China to upstart domestic brands following a consumer boycott over its stance on Xinjiang cotton.
Western companies sought to distance themselves from the alleged use of forced labour in Xinjiang, the western region that is home to an ethnic Muslim Uyghur minority, and which supplies more than 80% of China’s cotton.
The German sportswear group has replaced Jason Thomas, head of its China operations, the company told the Financial Times.
The shake-up follows a fall in sales in the region of roughly 15% for two consecutive quarters last year.
China, according to McKinsey research, overtook the US to become the world’s biggest spender on fashion in 2019.
- Reuters, with additional editing by George Russell