LONDON – Adidas is more confident on sales this year as it sees stronger than expected demand for its products around the world for its products despite a consumer boycott in mainland China.
The German sporting goods retailer assumes that currency-adjusted sales will increase at a “high-teens” rate this year, with a “significant” acceleration already being recorded in the second quarter, the company announced on Friday.
“This acceleration is being driven by a number of innovative product releases,” Adidas said in a statement. Major sporting events like UEFA Euro and Copa America are expected to support the deal as well.
The company posted net income of 502 million euros (605 million US dollars) for the first quarter of this year, compared to 26 million euros in 2020. Currency-neutral sales for the company increased 27% during the reporting period.
China boycott
The company said sales in China rose 156% in the first three months of the year.
This despite a boycott of some international brand consumers in mainland China who have spoken out against the treatment of one of China’s ethnic minorities in the Xinjiang region, which is home to many cotton plantations.
The ethnic Uyghurs, who live primarily in western China, have been identified as an oppressed group by the United Nations, the United States, the United Kingdom, and others.
In March, Canada, the UK and the US issued a joint statement expressing “deep and continuing concern” about forced labor, mass detention in detention centers and other abuses against Uyghurs in Xinjiang. In March, the European Union imposed sanctions on Chinese officials responsible for abuses against Uyghurs.
China’s Foreign Ministry in March characterized such claims as “malicious lies” intended to “smear China” and “thwart China’s development.”
Adidas previously said that there is a “zero tolerance approach to slavery and human trafficking”.
In an October 2019 statement, when we learned of allegations against several companies in Xinjiang, China, where ethnic minorities were reportedly subjected to forced labor in spinning mills, we specifically urged our fabric suppliers not to source yarn from the Xinjiang region. “
It added, “Adidas has never manufactured goods in Xinjiang and has no contractual relationship with any Xinjiang supplier.”
That year, the German retailer also joined the Better Cotton Initiative, a nonprofit that decided last year to cease operations in Xinjiang due to human rights concerns.
Adidas and other Western brands, including Nike and H&M, faced backlash on Chinese social media following their comments on the situation in Xinjiang. Some Chinese consumers have boycotted the brands, choosing instead to buy products from domestic companies.
Adidas did not explicitly refer to the issue in its earnings release on Friday, but cited “adverse effects” from issues such as “the geopolitical situation”.
Kasper Rorsted, CEO of Adidas, told CNBC that he continues to expect “very strong growth” from China for the full year.
“We are therefore still very confident that we will further expand our position in China, our largest single market,” he told CNBC’s Squawk Box Europe on Friday.
“This is of course a sensitive issue and we are doing everything we can to ensure that human rights are protected.”
Despite the controversy, Rorsted said he doesn’t think there will be any major shift in the company’s supply chains.
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