Investing

Adidas Outlook Darkened by Russia Exit Costs, Slowing Sales, and Rising Inventory

Adidas shares (DE:ADS) (US:ADDYY) slipped on Friday after the German shoemaker and athletic retailer said a one-two punch of weakening sales and pricing in western markets and ongoing production woes in China hit results.

The warning is Adidas’s third this year.

“The speed with which Adidas’s previously lowered guidance has crumbled under the scrutiny of a more stressed consumer will unnerve investors,” analysts at Jefferies said after the news.

The company said on Thursday that its upcoming earnings would show roughly  500 million euros of costs to exit Russia. Late Thursday, Adidas warned that it expects a big blow to its bottom line from one-off costs mainly relating to its previously announced Russian exit.

It also cut its revenue outlook and saw sales growth in the mid single digits against the previous mid to high single digits forecast.

Like many rivals, Adidas said the consumer slowdown backed up inventory and expects that to weigh on margins, which it also said would fall this year.

On Oct. 5, Argus Research analysts downgraded Adidas rival Nike (US:NKE) to hold from buy. They said the company would have to discount inventory it overstocked, which would eat away at gross margins.

The downgrade follows Nike’s generally positive results for the fiscal first quarter, including revenue and earnings per share above Wall Street’s consensus estimates. The revenue beat by $400 million and came in at $12.68. better-than-expected North American sales offset weak China sales.

“Nike Direct sales rose 8%, while reported revenue in China fell 16%. The reported gross margin fell to 44.3% from 46.5%, reflecting higher transportation and logistics costs, an increase in markdowns, and foreign exchange headwinds, offset partly by higher selling prices. The consensus estimate had called for a gross margin of 45.3%,” the report noted.

Nike also resumed share buybacks and repurchased $1.0 billion of its stock in the fiscal first quarter.

This article originally appeared on Fintel

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