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Adidas (OTC: ADDYY) cut its full-year sales and profit predictions on Wednesday, blaming supplier delays and a difficult market climate in China after third-quarter earnings fell short of analyst expectations.
Adidas reported third-quarter sales of 5.752 billion euros ($6.65 billion) were up a currency-neutral 3 percent year on year, while operating profit declined 8.5 percent to 672 million euros, falling short of analyst expectations of 5.83 billion and 682 million euros, correspondingly.
Adidas shares were down 3% in early trading in Frankfurt. Because of COVID-19 outbreaks, factories in Vietnam, a major supplier to the footwear industry, were forced to close for up to 11 weeks.
Puma, an Adidas competitor, has warned that supply bottlenecks may result in product shortages well into 2022.Adidas stated that the difficult market in Greater China, COVID-19 lockdowns in the Asia-Pacific region, and supply chain interruptions reduced revenue growth by around 600 million euros in the third quarter.
Sales fell 15% in Greater China owing to renewed pandemic restrictions as well as the “geopolitical” situation, the company said. Since March, Western brands such as Adidas have faced a consumer boycott in China due to previous declarations stating that they would not source cotton from Xinjiang due to reports of human rights violations against Uyghur Muslims.
Beijing denies any wrongdoing. Adidas said it still expects currency-neutral revenue to rise by up to 20% in 2021, but it now anticipates growth to be lower, without providing any details.
It also expects to fall short of previous projections for a 2021 operating margin of 9.5 percent to 10% and a net income from continuing operations of 1.4 billion to 1.5 billion euros.
Story by : Norvisi Mawunyegah