German sportswear company Adidas recently released its financial report for the second quarter of 2021, which showed that revenue for Greater China during the period was only 1 billion euros ($1.174 billion), down 16% year-on-year. It was the only region to experience negative revenue growth for Adidas in the second quarter.
The financial report also shows that the group’s total revenue reached 5.077 billion euros, up 52% year-on-year, while its operating profits were 543 million euros. Adidas’s revenue in North America increased 87% year-on-year and 99% in EMEA (Europe, Middle East and Africa). It increased rapidly in Latin America – 230% year-on-year – but only by 66% in the wider Asia-Pacific region. Regional development for the company appears to be quite uneven.
On one hand, Adidas’s setbacks in Greater China may be related to its involvement in the Xinjiang cotton dispute, and on the other hand influenced by Chinese consumers paying more attention to competing domestic brands.
In March earlier this year, Swedish clothing brand H&M issued a statement announcing that it would no longer purchase cotton from Xinjiang, alleging the use of “forced labor” in the region. Later, Chinese netizens found that Adidas, Nike and other foreign companies had also previously issued statements to declare their boycotting of Xinjiang cotton. This behavior sparked resistance from domestic consumers, who argue that the foreign companies make money in the Chinese market while spreading rumors and slandering Xinjiang cotton.
Chinese Foreign Ministry spokesperson Hua Chunying has previously asserted that cotton grown in Xinjiang is some of the best cotton in the world, and it would represent a loss for enterprises not to use it. According to Hua, the statement about “forced labor” in Xinjiang is nothing but malicious lies concocted by a few anti-China forces in an attempt to smear China.
Adidas’s recent lackluster performance in the Chinese market is also related to the fact that some domestic consumers have begun to switch to competing domestic products. According to American investment research institution Morningstar, April sales by Tmall flagship stores of Adidas and Nike decreased by 78% and 59%, respectively, while sales of Tmall stores of Li-Ning’s fashion product line “China Li-Ning” increased by 800% year-on-year, and the sales of several brands of Anta increased by 59% year-on-year.
Kasper Rorsted, CEO of Adidas Group, said, “we do see that the current market demand has been biased towards Chinese local brands rather than global brands.” However, he also expressed confidence that Adidas’s performance in the Chinese market would rebalance in the future.