Germany's Adidas grows double-digit in western markets in Q1FY22

DTC revenues increased 1 per cent versus the prior year, reflecting a 33 per cent increase compared to the 2020 level. While Adidas e-commerce revenues experienced a double-digit increase in the share of full-price sales, revenues in the company’s own digital channel increased 2 per cent during the quarter reflecting the exceptionally high growth in the prior year period. Compared to the 2020 level, e-commerce revenues grew 50 per cent in the first quarter.

The company’s gross margin in the first quarter was down 1.9 percentage points to 49.9 per cent. This decrease was mainly driven by a significant increase in sourcing and freight costs. In addition, the negative impact from a less favourable market mix as well as tough prior year comparables in e-com weighed on the gross margin development. These effects could not be offset by the positive impact from a significantly higher share of full-price sales as well as first selective price increases, mainly on DTC exclusive products, the company said in a press release.

“In the first quarter, consumer demand for our brand and products was strong in all western markets. Our combined sales in North America, EMEA and Latin America grew at a double-digit rate. Backed by an exceptionally strong wholesale order book and relentless focus on driving growth in our own DTC channels, we expect this positive development to continue for the rest of the year,” said Adidas CEO Kasper Rorsted. “In the East, we will return to growth in Asia-Pacific in the second quarter, while we expect the challenging market environment in Greater China to continue. With strong double-digit growth in the vast majority of our markets, representing more than 80% of our business, we are well positioned for success in 2022.”

Despite several external factors continuing to weigh on industry-wide demand and supply, Adidas confirms its top- and bottom-line outlook for 2022. While the company continues to expect currency-neutral revenues to increase by a rate of between 11 per cent and 13 per cent, growth is now anticipated to come in at the lower end of this range due to the severe impact from COVID-19-related lockdowns in China. Consequently, net income from continuing operations is also forecasted to reach the lower end of the previously communicated range of between €1.8 billion and €1.9 billion.

Because of the less favourable market mix due to lower-than-expected revenues in Greater China, the company’s gross margin is now expected to be around the prior year’s level of 50.7 per cent in 2022. As Adidas will continue to invest into the brand, its products as well as DTC and digital to support double-digit growth in all other markets in 2022 and long-term market share gains around the globe, the company also expects its operating margin to come in at around the prior year’s level of 9.4 per cent.

Fibre2Fashion News Desk (RR)