Adidas reports strong growth, raises outlook as it banks on sporting events

German sportswear company Adidas AG is raising its 2021 earnings outlook, expecting major sporting events to tide over demand while it navigates continued lockdowns in Europe and boycotts in China.

Adidas said in a statement, it is hoping sales in 2021 will reach percentage growth in the high teens, buoyed by a 50% surge in the second quarter.

The higher than expected sales projection helped Adidas stock jump 8.1% by 11 a.m. U.K. time on Friday.

Growth in sales would be driven by new products like the Ultraboost running shoe, designed to be recycled, as well as big sporting events such as European soccer championship UEFA Euro and Copa America, Adidas said.

The company’s relations with China and Chinese consumers soured in March when major sporting companies including Adidas and rivals Nike and Puma made statements on the human rights abuse of the Uighur Muslim population in the cotton-rich region of Xinjiang. Boycotts of Adidas, Puma, and Nike products ensued.

China on the mind

Adidas didn’t mention the issue, but said its new outlook took into account the “geopolitical situation,” possibly in reference to China.

Greater China represents 15% of sales for Puma and 24% for Adidas brand, and generally carries a higher margin. In terms of sourcing, China contributes to approximately 30% for Puma and 15% for Adidas footwear and 20% for apparel,” Deutsche Bank analyst Francesca DiPasquantonio said in a research note.

In March, Adidas saw a steep drop in demand, but sales appear to have come off their worst.

“We are still very confident that we will have a very good year in China,” Reuters reported chief executive Kasper Rorsted as saying.

Adidas noted that sales jumped by 156% in greater China in the first quarter, one year since the pandemic began.

Overall Adidas has managed to open 89% of its company’s stores around the world, allowing their first-quarter sales to rise by 20% to €5.268 billion ($6.35 billion), ahead of consensus for €5 billion ($6 billion).

Earlier in the year, Adidas revealed an ambitious plan spanning five years as it sought to recover from the damage caused by the pandemic.

Meanwhile, rival Puma said last month it expects the political tensions in its “key markets” as well as congestion at its ports would depress sales in 2021, but still reported a strong first quarter with sales growing by 25.8%.

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