Adidas Faces Short-Term Performance Momentum Loss Amid China Boycott Movement

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Minji Lee] Due to production issues in Vietnam and the impact of the boycott movement in China, there are forecasts that Adidas' stock price may remain sluggish for the time being.

According to the financial investment industry on the 16th, Adidas recorded second-quarter sales of 5.08 billion euros, slightly exceeding market expectations, marking a 42% growth compared to a year ago. Excluding exchange rates, sales increased by 55% compared to the previous year. Operating profit turned positive at 540 million euros, significantly surpassing the consensus of 440 million euros.

By market, the North American and EMEA markets grew strongly by 87% and 99%, respectively, driven by strong demand based on the resumption of sports events. On the other hand, sales in the Chinese market decreased by about 16% due to the boycott. Comparing with the same period in 2019 to exclude the base effect caused by COVID-19, second-quarter sales increased by 5%, and first-quarter sales rose by 1%.

The focus during the second-quarter earnings announcement was on the impact of the lockdown at the Vietnam production plant and the recovery of sales in China. A Hana Financial Investment analyst said, “The company actively responded by adjusting product sourcing regions, securing additional production capacity, and utilizing air transport to minimize the impact of the Vietnam lockdown,” adding, “Although the boycott issue in China is expected to decrease in the future, the sales decline is relatively larger compared to competitors (Nike, Puma), so future performance trends need to be monitored.”

This year, the company raised its annual forecast, increasing the upper limit of sales growth from the previous 17-19% to 20%. The operating profit margin was also adjusted from 9-10% to 9.5-10%. Net profit was raised to 1.4-1.5 billion euros. Analyst Kim said, “The guidance adjustment forecasts a 7% sales growth in the second half, slightly below the market consensus of 7.7%,” adding, “It was presented conservatively considering external factors such as production issues in Vietnam and uncertainties in China.”

The stock price slump is expected to continue. This is due to a lack of relative performance rebound momentum compared to competitors like Nike and Under Armour, and concerns over uncertainties in China. Analyst Kim Jae-im said, “It is certain that the entire sportswear market has strong mid- to long-term rebound momentum and that Adidas is also expected to benefit,” adding, “However, in the short term, further confirmation is needed regarding relative competitiveness enhancement.”

This content was produced with the assistance of AI translation services.