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Retail & Consumer

Adidas shrugs off China boycott call to raise outlook

4 minute read

German sportswear company Adidas (ADSGn.DE) sees only a short-term impact from Chinese calls in March for a boycott of its products, raising its 2021 sales forecast on Friday as it expects a resumption of big sporting events to drive demand.

Adidas 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 events like the European soccer championship, the Copa America and the Tokyo Olympics.

Shares in Adidas, which had fallen in recent weeks on concerns about sales in China, were up 8.2% at 0907 GMT, the biggest gain on the German blue-chip index (.GDAXI). Shares in rival Puma were also up 2%.

Western brands including Adidas, Nike (NKE.N) and Puma (PUMG.DE) faced online attacks in China in late 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. read more

Adidas initially saw a steep drop in demand but sales have since recovered slowly but steadily, Chief Executive Kasper Rorsted told journalists: "We are still very confident that we will have a very good year in China."

A closed Adidas store is pictured during the spread of the coronavirus disease (COVID-19) in Hamburg, Germany March 28, 2020. REUTERS/Fabian Bimmer/File Photo

Before the boycott call, sales jumped 156% in greater China in the first quarter, a year after the coronavirus pandemic hit there, to account for more than a quarter of total sales.

The row over Xinjiang could impact the sale by Adidas of its Reebok brand, as it could hit the appeal of the company to potential Chinese buyers, three sources told Reuters this week. read more

But finance chief Harm Ohlmeyer said the sale process was well on track and Adidas was talking to several interested parties and hoped to complete a deal by the end of the year.

Adidas said the more upbeat outlook took into account problems with freight transport due to congestion at U.S. ports and the recent blockage of the Suez canal, as well as ongoing lockdowns in Europe, with 91% of stores now reopened globally.

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

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.

($1 = 0.8290 euros)

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