German sports sneaker and apparel maker Adidas AG (ADDYY.PK,ADDDF.PK) reported that its third quarter net income attributable to shareholders dropped to 347 million euros or 1.91 euros per share from 960 million euros or 4.94 euros per share in the prior year.
Quarter net income from continuing operations declined to 66 million euros from the prior year’s 479 million euros. The latest quarter results negatively impacted by several one-off costs totaling almost 300 million euros as well as extraordinary tax effects in the third quarter.
But adidas’ currency-neutral revenues increased 4% in the third quarter.
The company noted that its decision to suspend its own operations in Russia at the end of the first quarter significantly reduced revenues by more than 100 million euros during the third quarter, particularly impacting the company’s direct-to-consumer (DTC) business.
In euro terms, the company’s revenues grew 11% to 6.408 billion euros in the third quarter compared to 5.752 billion euros last year.
Following the decision on October 25, 2022, to terminate the adidas Yeezy partnership, adidas now incorporates the related top- and bottom-line impact into its guidance for fiscal year 2022, reflecting the high seasonality of the adidas Yeezy business geared towards the fourth quarter.
Therefore, adidas said it now expects currency-neutral revenues for the total company to grow at a low-single-digit rate in 2022. The company’s gross margin is now expected to be around 47.0% in 2022. adidas now forecasts its operating margin to be around 2.5% in 2022 and net income from continuing operations to reach a level of around 250 million euros.
In 2023, the company expects the non-recurrence of the one-off costs of around 500 million euros occurred in 2022 to have a positive impact on the net income development in the same magnitude. In addition, it is expected to deliver a positive profit contribution of around 200 million euros next year.
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