Shares in Adidas fell more than 9 per cent on Friday after the sportswear group sounded the alarm on profits for the second time in three months.
The warning came as the company disclosed late on Thursday that is was sitting on a growing pile of unsold trainers and other kit as sales in China and the western markets have been much lower than expected.
The retailer has had to contend with a publicity crisis in recent weeks over its tie-up with rapper and designer Kanye West as it searches for a new chief executive.
Adidas, the world’s second largest sportswear maker, warned that profits will be some 60 per cent lower this year than previously expected as sales slow down. The operating profit margin is expected to fall 4 per cent, compared with a previous goal of 7 per cent and less than half the 9.4 per cent it earned last year.
Shares in Adidas, which are trading at the lowest level in six years, are down 62 per cent over the past 12 months, turning the group into the third worst performing German blue-chip.
It announced the early departure of chief executive Kasper Rørsted weeks after it published its first profit warning in late July. He will leave the company in 2023, having previously negotiated a contract extension until 2026.
Two people with direct knowledge of the internal discussions told the Financial Times that Rørsted resigned after large investors had become increasingly dissatisfied with the German brand’s lacklustre sales performance and a fall in the share price, which they argued trailed both Nike and Puma. Adidas has not yet named a successor for Rørsted, who joined the group in 2016 from Persil and Loctite maker Henkel.
The brand’s current management on Thursday announced a €500mn cost-cutting programme to tackle “the significant cost increases resulting from the inflationary pressure across the company’s value chain as well as unfavourable currency movements.”
“The speed with which [Adidas’s] previously lowered guidance has crumbled under the scrutiny of a more stressed consumer will unnerve investors,” Jefferies analysts wrote in a note to clients.
In the third quarter, net income from continuing operations was 63 per cent lower than the previous year as fewer customers visited Adidas’s shops in China and sales in the west suffered from a historic surge in inflation.
Adidas also had to digest more than €150mn in one-off costs linked to its decision to wind-down its Russian operations after it concluded that it would not resume trading “for the foreseeable future.”
It first paused sales in the country in March following Russia’s invasion of Ukraine, and it will now close all 500 shops and its online store. Sales in the country accounted for two per cent of its revenue.