Adidas saw its shares tumble Friday (Oct. 21) after projecting that profits would be lower this year as it deals with lower-than-expected sales and a glut of inventory.
In a message to investors this week, the company said its new outlook is based on “a further deterioration of traffic trends in Greater China as well as a significant inventory build-up as a result of lower consumer demand in major Western markets since the beginning of September.”
Adidas said in the message its income from continuing operations is expected to reach a level of around 500 million euros (about $489 million), previously at 1.3 billion euros (about $1.3 billion). Its operating profit margin is expected to drop 4%, versus its previous 7% projection.
The company told investors it had engaged in “higher clearance activity to reduce elevated inventory levels,” which were “up 63% on a currency-neutral basis” at the end of its third quarter.
In May, Adidas announced it expected lower operating profits than anticipated due to supply chain disruptions, increased costs, and store closures in China.
Last month saw Adidas rival Nike dealing with its own inventory troubles, with company officials vowing “decisive action” as North American inventories jumped 65%.
Read more: Nike Promises ‘Decisive Action’ on Inventory, More Investment in D2C
The news follows other misfortunes for Adidas, which has of late had to search for a new CEO while also dealing with a public feud with rapper Kanye West.
See more: Adidas Seeks CEO, Questions Kanye West Deal
Shares in the company, which are trading at their lowest level in six years, have fallen 62% over the last year. Adidas announced in August that CEO Kasper Rorsted would step down, although he will remain in that role as the company finds his successor.
“After three challenging years that were marked by the economic consequences of the COVID-19 pandemic and geo-political tensions, it is now the right time to initiate a CEO transition and pave the way for a restart,” Adidas AG Supervisory Board Chairman Thomas Rabe said in August.
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