The Gulf Time Newspaper One of the finest business newspapers in the UAE brought to you by our professional writers and editors.
Bloomberg
Adidas AG fell the most in four months as investors looked past a modest increase in profit guidance and focused instead on weaker demand in China and factory shutdowns in Vietnam.
While revenue in Europe and North America almost doubled in the second quarter, boosted by the phasing out of pandemic restrictions and a return of major sporting events, sales fell 16% in greater China, where some consumers have boycotted Western brands for taking a stance against forced labour in the Xinjiang region.
Chief Executive Officer Kasper Rorsted told reporters that demand in China steadily recovered in the second quarter, and that the company still expects “strong growth†in the country this year.
The German company is also grappling with supply-side headaches in Asia, where surging Covid cases caused the shuttering of factories
in southern Vietnam. The sneaker-maker sourced nearly a third of its products there in 2020. Coupled with a 22% drop in inventories, analysts are concerned the production hiccups will impede growth.
Goyal pointed to the company’s high sourcing exposure to regions experiencing shutdowns, such as Vietnam. She also said the 7% sales growth expected in the second half pales in comparison to the 40% achieved in the first.
The factory closures in southern Vietnam started on July 12, with the government there recently extending the lockdown measures through August 15. Adidas is trying to limit the fallout by turning to air freight and finding excess production capacity elsewhere.