LONDON – Adidas has raised its annual outlook despite a drop in sales in China, where some consumers have boycotted the sportswear brand for stance against alleged human rights abuses.
In its earnings report for the second quarter on Thursday, Adidas said sales increased everywhere except Greater China, particularly in Europe and the US, resulting in second-quarter sales up 55% year over year.
“We are seeing very, very strong growth in North America, Latin America and Europe and we are seeing uncertainty in China, but I am very, very confident that China will be very, very successful this year as well,” said Kasper Rorsted, CEO from Adidas, told CNBC’s Squawk Box Europe.
The German sportswear giant’s net income was € 397 million ($ 470 million) in the second quarter, in sharp contrast to the € 295 million net loss reported around this time last year at the height of the coronavirus pandemic.
Online sales decreased 14% in the second quarter as more consumers visited the stores. Adidas saw a sharp increase in online sales over the same period in 2020 when many markets were locked.
Rorsted said that online sales have “normalized” somewhat from the abnormal levels seen last year, but he continues to expect “strong growth” in e-commerce.
Adidas raised its outlook and expected sales growth of up to 20% year over year in 2021, aided by upcoming product releases and the fact that more people will be able to attend live sporting events.
The company’s China sales are being closely watched by analysts and investors.
Adidas said Thursday that second-quarter sales in Greater China were down more than 16%.
Pedestrians walk past a large Adidas logo inside the German multinational sportswear shop.
Miguel Candela | SOPA pictures | LightRocket via Getty Images
“We especially saw an impact on our online business in China in the second quarter due to geopolitical tensions and we think this will normalize over time,” said Rorsted.
It comes after some mainland Chinese consumers started boycotting international brands that opposed 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, Britain, and others.
Earlier this year, Canada, the UK and the US issued a joint statement expressing their “deep and ongoing concern” about forced labor, mass detention in detention centers and other serious attacks against Uyghurs in Xinjiang. The European Union imposed sanctions on Chinese officials in March who it says are responsible for abuses against Uyghurs.
The Chinese Foreign Ministry has labeled such claims “malicious lies” aimed at “defaming China” and “thwarting China’s development.”
Adidas previously said it has a “zero tolerance approach to slavery and human trafficking”.