By Joshua Kirby


Adidas AG on Thursday lowered its outlook for 2022 for the third time this year, warning that its earnings will be dragged by one-off costs relating to its exit from Russia, continued restrictions in China, and a build-up of inventory.

Setting out third-quarter results ahead of schedule, the German sportswear major said net income from continuing operations fell significantly to 179 million euros ($175 million) in the quarter from EUR479 million in the same period last year. The hit was largely due to one-off costs relating to its decision to wind down its operations in Russia, the company said, though it said its operating margin also declined to 8.8% in the quarter from 11.7% previously.

Further one-off costs will lead to a total hit of around EUR500 million on full-year earnings, with net income from continuing operations now seen at some EUR500 million compared a previous expectation of around EUR1.3 billion, Adidas said.

A further headwind comes from clearing action necessitated by excess inventory, which climbed 63% as of the end of the third quarter, contributing to the lower earnings outlook, the company said.

This summer, Adidas cut its guidance for the year as Greater China sales struggled to recover amid strict antipandemic restrictions that have squeezed traffic and demand in the country. The company later said Chief Executive Kasper Rorsted would step down at some point in 2023.

As expected, third-quarter revenue declined by "strong" double digits at constant currency in Greater China, with overall group growth of 4%, according to the preliminary results, Adidas said.

Full-year revenue is now seen in the mid-single digits, compared with previous guidance of mid-to-high single-digit growth, Adidas said. Similarly, the gross and operating margins are expected to be lower than previously guided, at around 47.5% and 4%, respectively.

Next year's earnings will be boosted by non-recurrence of the one-off costs, Adidas said. The company has also established a program to protect profitability amid the challenging environment, the company said, forecasting a EUR200 million contribution from the program in 2023.

Adidas is due to report full nine-month results on Nov. 9.


Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby


(END) Dow Jones Newswires

10-20-22 1308ET