Adidas Shares Stumble After 2022 Guidance Cut
October 21 2022 - 04:42AM
Dow Jones News
By Joshua Kirby
Shares in Adidas AG lost ground in early trade Friday after the
German sporting-goods company again cut financial guidance for the
year, blaming major one-off costs and slowdown in Western markets
that add to existing problems in China.
At 0810 GMT, shares traded 9% lower at EUR104.48. Smaller peer
Puma fell 6% to EUR44.48.
Late Thursday, Adidas warned that it expects a big hit to its
bottom line from one-off costs largely relating to its exit from
operations in Russia. Net income from continuing operations should
come in at some EUR500 million ($489.4 million) for the year,
against a previous target of around EUR1.3 billion, the company
The company also expects lower revenue for the year, with growth
now seen in the mid-single digits compared with a previous
expectation for mid-to-high single digit growth. Adidas pointed to
slowing consumer demand in major Western markets, leading to stock
build-up that will drag its margins, now also seen lower for the
year. Inventory levels spiked by 63% as of the end of the third
quarter from a year earlier, Adidas said.
U.S. rival Nike Inc. last month reported a similar surge in
inventory, warning of a squeeze on profit margins from resulting
discounts and other clearing activity necessary to sell off excess
The warning is Adidas's third this year. The company slashed
full-year targets in May and again in July, as sales struggled to
recover in China amid pandemic-related lockdowns and store closures
that have strangled traffic and demand in the key market.
"The speed with which Adidas's previously lowered guidance has
crumbled under the scrutiny of a more stressed consumer will
unnerve investors," analysts at Jefferies said after the news.
Warnings from sportswear's two biggest companies, Adidas and Nike,
also bode ominously for Germany's Puma, they said in a note.
Adidas's updated guidance is moreover far from certain, Citi's
Thomas Chauvet and Lorenzo Bracco said in a note. Assumptions for
fourth-quarter revenue will rely on a boost from the soccer World
Cup set to kick off in Qatar next month, they said.
But the new guidance could be the reality dose that Adidas
needs, analyst Piral Dadhania at RBC Capital Markets said in a
note. If 2023 consensus estimates are adjusted accordingly, that
could leave the company well-placed to deliver in line with
expectations in the context of an attractive valuation, Dadhania
Write to Joshua Kirby at firstname.lastname@example.org;
(END) Dow Jones Newswires
October 21, 2022 04:27 ET (08:27 GMT)
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