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Adidas shrugs off China boycott call to raise outlook

Stock Markets21 minutes ago (May 07, 2021 03:56AM ET)Adidas shrugs off China boycott call to raise outlook© Reuters. FILE PHOTO: A closed Adidas store is pictured during the spread of the coronavirus disease (COVID-19) in Hamburg, Germany March 28, 2020. REUTERS/Fabian Bimmer

By Emma Thomasson

BERLIN (Reuters) -German sportswear company Adidas (OTC:ADDYY) shrugged off Chinese calls in March for a boycott of its products and raised its 2021 sales forecast on Friday, saying it expects upcoming sporting events to drive strong demand for new products.

Adidas said it now sees sales growing at a high-teens percentage rate in 2021, compared with a March forecast for mid-to-high teens growth, with a jump of around 50% expected in the second quarter.

It said the acceleration would be driven by new products such as Ultraboost running shoes that are designed to be recycled, as well as big sports events like the European soccer championship and the Copa America.

Shares in Adidas, which had fallen in recent weeks on concerns about sales in China, were up 7% at 0728 GMT, the biggest gain on the German blue-chip index. Shares in rival Puma were also up 1.8%.

“A slight upping of 2021 organic growth guidance suggests that concerns around the … damage to Chinese prospects appear overblown,” said Jefferies (NYSE:JEF) analyst James Grzinic.

Western brands including Adidas, Nike (NYSE:NKE) and Puma faced online attacks in China in March over past statements saying they would not source cotton from Xinjiang after reports of human rights abuses against Uyghur Muslims. Beijing denies any such abuses.

Adidas did not directly mention the issue on Friday, beyond saying its new outlook took into account the geopolitical situation as well as the impact of prolonged lockdowns in Europe and industry-wide supply chain challenges.

However, it did say its sales jumped 156% in greater China in the first quarter, a year after the coronavirus pandemic hit there. At the end of the first quarter, 89% of the company’s stores had reopened around the world.

Puma said last month it expected a consumer backlash against Western brands in China and congestion at ports to hit its sales, though it gave an upbeat outlook for 2021.

Adidas said first-quarter sales rose 20% to 5.268 billion euros ($6.35 billion), ahead analysts’ average forecast of 5 billion, while net income from continuing operations jumped to 502 million euros.

The company stuck to its forecast for 2021 net income from continuing operations to rise to 1.25-1.45 billion euros.

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