From the Sector

• Currency-neutral sales up 4%, despite more than € 300 million negative impact from macroeconomic constraints
• Markets representing more than 85% of the business grow 14% overall
• Gross margin down 1.5pp to 50.3% reflecting significantly higher supply chain costs
• Operating profit reaches € 392 million
• Net income from continuing operations amounts to € 360 million
• FY 2022 outlook reflects double-digit growth during the second half of the year

“Our Western markets continued to show strong momentum in the second quarter amid heightened macroeconomic uncertainty. With Asia-Pacific returning to growth, markets combined representing more than 85% of our business grew at a double-digit rate,” said adidas CEO Kasper Rorsted. “With sports back at center stage this summer, revenues in our strategic growth categories Football, Running and Outdoor all increased by double digits. However, the macroeconomic environment, particularly in China, remains challenging. The recovery in this market is – due to continued covid-19-related restrictions – slower than expected. And we have to take into account a potential slowdown in consumer spending in all other markets for the remainder of the year.”

Currency-neutral revenues increase 4% despite macroeconomic constraints
In the second quarter, currency-neutral revenues increased 4% as adidas continued to see strong momentum in Western markets. This growth was achieved despite continued challenges on both supply and demand. Supply chain constraints as a result of last year’s lockdowns in Vietnam reduced top-line growth by around € 200 million in Q2 2022. In addition, the company’s decision to suspend its operations in Russia reduced revenues by more than € 100 million during the quarter. Continued covid-19-related lockdowns in Greater China also weighed on the top-line development in Q2. From a channel perspective, the top-line increase was to a similar extent driven by the company’s own direct-to-consumer (DTC) activities as well as increases in wholesale. Within DTC, e-commerce, which now represents more than 20% of the company’s total business, showed double-digit growth reflecting strong product sell-through. From a category perspective, revenue development was strongest in the company’s strategic growth categories Football, Running and Outdoor, which all grew at strong double-digit rates. In euro terms, revenues grew 10% to € 5.596 billion in the second quarter (2021: € 5.077 billion).

Strong demand in Western markets
Revenue growth in the second quarter was driven by Western markets despite last year’s lockdowns in Vietnam still reducing sales, particularly in EMEA and North America, by
€ 200 million in total. In addition, the top-line development in EMEA was also impacted by the loss of revenue in Russia/CIS of more than € 100 million. Nevertheless, currency-neutral sales grew 7% in the region. Revenues in North America increased 21% during the quarter driven by growth of more than 20% in both DTC and wholesale. Revenues in Latin America increased 37%, while Asia-Pacific returned to growth. Currency-neutral revenues increased 3% in this market despite still being impacted by limited tourism activity in the region. In contrast, the company continued to face a challenging market environment in Greater China, mainly related to the continued broad-based covid-19-related restrictions. As a result, currency-neutral revenues in the market declined 35% during the three-months period, in line with previous expectations. Excluding Greater China, currency-neutral revenues in the company’s other markets combined grew 14% in Q2.

Operating profit of € 392 million reflects operating margin of 7.0%
The company’s gross margin declined 1.5 percentage points to 50.3% (2021: 51.8%). Significantly higher supply chain costs and a less favorable market mix due to the significant sales decline in Greater China weighed on the gross margin development. This could only be partly offset by a higher share of full price sales, first price increases and the benefits from currency fluctuations. Other operating expenses were up 19% to € 2.501 billion (2021: € 2.107 billion). As a percentage of sales, other operating expenses increased 3.2 percentage points to 44.7% (2021: 41.5%). Marketing and point-of-sale expenses grew 8% to € 663 million (2021: € 616 million). The company continued to prioritize investments into the launch of new products such as adidas’ new Sportswear collection, the next iteration of its successful Supernova running franchise and first drops related to the Gucci collaboration as well as campaigns around major events like ‘Run for the Oceans.’ As a percentage of sales, marketing and point-of-sale expenses were down 0.3 percentage points to 11.8% (2021: 12.1%). Operating overhead expenses increased by 23% to a level of € 1.838 billion (2021:
€ 1.492 billion). This increase was driven by adidas’ continuous investments into DTC, its digital capabilities and the company’s logistics infrastructure as well as by unfavorable currency fluctuations. As a percentage of sales, operating overhead expenses increased 3.5 percentage points to 32.8% (2021: 29.4%). The company’s operating profit reached a level of € 392 million (2021: € 543 million), resulting in an operating margin of 7.0% (2021: 10.7%).

Net income from continuing operations reaches € 360 million
The company’s net income from continuing operations slightly declined to € 360 million (2021: € 387 million). This result was supported by a one-time tax benefit of more than € 100 million due to the reversal of a prior year provision. Consequently, basic EPS from continuing operations reached € 1.88 (2021: € 1.93) during the quarter.

Currency-neutral revenues on prior year level in the first half of 2022
In the first half of 2022, currency-neutral revenues were flat versus the prior year period. In euro terms, revenues grew 5% to € 10.897 billion in the first six months of 2022 (2021:
€ 10.345 billion). The company’s gross margin declined 1.7 percentage points to 50.1% (2021: 51.8%) during the first half of the year. While price increases as well as positive exchange rate effects benefited the gross margin, these developments were more than offset by the less favorable market mix and significantly higher supply chain costs. Other operating expenses increased to € 4.759 billion (2021: € 4.154 billion) in the first half of the year and were up 3.5 percentage points to 43.7% (2021: 40.2%) as a percentage of sales. adidas generated an operating profit of € 828 million (2021: € 1.248 billion) during the first six months of the year, resulting in an operating margin of 7.6% (2021: 12.1%). Net income from continuing operations reached € 671 million, reflecting a decline of € 219 million compared to the prior year level (2021: € 890 million). Accordingly, basic earnings per share from continuing operations declined to € 3.47 (2021: € 4.52).

Average operating working capital as a percentage of sales slightly decreases
Inventories increased 35% to € 5.483 billion (2021: € 4.054 billion) at June 30, 2022 in anticipation of strong revenue growth during the second half of the year. Longer lead times as well as the challenging market environment in Greater China also contributed to the increase. On a currency-neutral basis, inventories were up 28%. Operating working capital increased 23% to € 5.191 billion (2021: € 4.213 billion). On a currency-neutral basis, operating working capital was up 14%. Average operating working capital as a percentage of sales decreased 0.4 percentage points to 21.0% (2021: 21.4%), reflecting an overproportional increase in accounts payable due to higher sourcing volumes and product costs.

Adjusted net borrowings at € 5.301 billion
Adjusted net borrowings amounted to € 5.301 billion at June 30, 2022, representing a year-over-year increase of € 2.155 billion (June 30, 2021: € 3.146 billion). This development was mainly due to the significant decrease in cash and cash equivalents.

FY 2022 outlook reflects double-digit growth during the second half of the year
On July 26, adidas adjusted its guidance for FY 2022 due to the slower-than-expected recovery in Greater China since the start of the third quarter resulting from continued widespread covid-19-related restrictions. adidas now expects currency-neutral revenues for the total company to grow at a mid- to high-single-digit rate in 2022 (previously: at the lower end of the 11% to 13% range), reflecting a double-digit decline in Greater China (previously: significant decline). While so far the company did not experience a meaningful slowdown in the sell-through of its products or significant cancellations of wholesale orders in any market other than Greater China, the adjusted guidance also accounts for a potential slowdown of consumer spending in those markets during the second half of the year as a result of the more challenging macroeconomic conditions. Therefore, growth in EMEA is now expected to be in the low teens (previously: mid-teens growth), while revenues in Asia-Pacific are projected to grow at a high-single-digit rate (previously: mid-teens growth). Despite the more conservative view on the development of consumer spending in the second half of the year, adidas has increased its forecasts for North America and Latin America reflecting the strong momentum the brand is enjoying in these markets. In North America, currency-neutral revenues are now expected to increase in the high teens. Sales in Latin America are projected to grow between 30% and 40% (both previously: mid- to high-teens growth).   

Due to the less favorable market mix and the impacts from initiatives to clear excess inventories in Greater China until the end of the year, gross margin is now expected to reach a level of around 49.0% (previously: around 50.7%) in 2022. Consequently, the company’s operating margin is now forecast to be around 7.0% (previously: around 9.4%) and net income from continuing operations is expected to reach a level of around € 1.3 billion (previously: at the lower end of the € 1.8 billion to € 1.9 billion range).

Langjährige Logistik- und Supply Chain Expertise, internationale Berufserfahrung, unterschiedliche Führungspositionen in der Fashionindustrie – mit Tobias Wolter holt sich das Streetwear-Unternehmen LFDY einen erfahrenen Experten aus der Modebranche an Bord. Ab dem 01. Juni 2022 ist der 48-Jährige als Director Supply Chain für die Bereiche Einkauf, Logistik und Customer Service zuständig. Dabei liegt sein Hauptaugenmerk darauf, diese drei komplexen Bereiche verstärkt aufeinander abzustimmen und sie gleichzeitig stärker mit den weiteren internen und externen Schnittstellen zu verknüpfen. Ziel ist es, eine robuste und ebenso agile Lieferkette zu etablieren.

Wolters Karriereweg begann vor 25 Jahren bei dem Modekonzern Esprit. Hier sammelte er Erfahrungen in unterschiedlichen Positionen der Konzernlogistik, unter anderem verantwortete er als Logistics Manager North America die Logistikorganisation und regionale Supply Chain der Esprit-Märkte USA und Kanada. Weitere berufliche Stationen bei Hugo Boss in Metzingen und der Beratung Tailorit führten ihn 2016 zum Modeunternehmen Peek & Cloppenburg. Als Head of SCM E-Commerce verantwortete er zuletzt die operative Steuerung und Weiterentwicklung der B2C-Logistikkette sowie deren Integration in die Omnichannel-Strategie der Unternehmensgruppe.

„Mir steht eine spannende Aufgabe bevor. Gemeinsam mit meinem neuen Team möchte ich aktiv an einem nachhaltigen Wachstum von LFDY mitwirken. Dafür werden wir eine übergreifende Supply Chain-Strategie erarbeiten, die das geplante Wachstum sowie weitere Internationalisierungsmaßnahmen optimal abbilden und eine skalierbare Umsetzung ermöglichen. Es gibt also einiges zu tun – ich freue mich darauf“, so Tobias Wolter, der künftige Director Supply Chain der Live Fast Die Young Clothing GmbH.

• March 16-18, 2022, Istanbul Expo Center
• Successful start of Texhibition, Istanbul Fabric and Textile Accessories Fair with over 10,000 visitors from 63 countries
• More than 160 exhibitors presented fabrics, yarns and accessories on approx. 5,000 square meters in the Istanbul Expo Center
• Intensive order activity in a professional trade fair atmosphere of over 1billion US$
• The organizer's objective: to double the area and number of exhibitors for the second event in September

With over 10,000 visitors, the premiere event of Texhibition Istanbul Fabric and Textile Accessories Fair, organized by the Istanbul Textile and Raw Materials Exporters' Association (ITHIB) and the Istanbul Chamber of Commerce (ITO) from March 16th to 18th, 2022 has successfully started.

İTHİB President Ahmet Öksüz: "Our exhibition platforms Texhibition Istanbul Fabric and Textile Accessories Fair and IFCO, Istanbul Fashion Connection, which was launched by our sister association IHKIB in February, play an important role in making Istanbul the fashion center of the Turkish textile and clothing industry. For the follow-up event to Texhibition in September this year, we expect the number of exhibitors and space to double."

The consistently positive feedback from the exhibitors underscores this expectation, as does the great interest shown by international visitors, including those from Denmark, Germany, France, Italy, the Netherlands and the UK.

The Turkish textile industry started with an export target of US$ 15 billion in 2022. The exhibition organizers assume that their platforms will contribute US$ 1 billion. Turkey is one of the most important procurement markets for the European textile industry and is becoming even more important in the course of the global supply chain problem and is now one of the top 3 most interesting procurement locations with its low prices, good quality products, reliable suppliers and short delivery times.

Exhibitors
On offer were high-quality and innovative fabrics from the weaving sector, including Kipaş Textiles, BTD Textile, Özdoku, Bossa and Yünsa; knitters like Gülle, Saka, Örkumod or İskur showed their current collections; yarn market leaders such as Korteks, Tepa and Gama were present, as were Şimşek Ege, EMR Zippers, Çağ-Tek and Öz-El Lastik for the accessories sector. A total of 166 exhibiting companies presented themselves in clearly structured segments in a professional trade fair atmosphere.

Frame program
In the Texhibition Forum, experts discussed the topics Sustainability, New Trends, Supply Chain and GMO-Free Cotton giving an outlook on the upcoming trends and developments in the Turkish textile industry. All events were heavily frequented by visitors.

Next Texhibition September 21-23, 2022

• Where performance and responsibility all together become the new norm
• Discover ROICA™ groundbreaking innovations in the sports field, and the bold partnerships that made them possible

Today ROICA™ main objective is to focus on and respond to new generation values in fashion. Values that are key for contemporary consumers, who are the ones leading the change throughout all the supply value chain, and have received even more attention since the beginning of the pandemic. ROICA™ by Asahi Kasei team knows that value creation is the basic foundation of contemporary business. Its teams are ready to go to the next level, answering to the market demand for top-notch innovation while sharing its responsibility efforts towards the new generation of consumer.

For this reason, the ROICA™ strategy is based on two key elements. On the one side, a strong focus on responsible innovation, able to respond to new fashion needs and desires while not harming the environment nor the society at large. On the other hand, a consolidation of partnerships along the whole supply chain through conversations and collaborations with companies sharing the ROICA™ values, in order to deliver creativity, solutions and design to all contemporary consumers.

It is of the utmost importance to share the current wardrobe stories developed and offered to contemporary consumer throughout our ROICA™ supply chain efforts. Starting from the various applications of ROICA™, from the fibre down to the outfits, passing from fabrics and manufacturing.

Activation
Performance sportswear styles for Gym, Athletics, Cycle wear, Athleisure as well as mindful Yoga and Exercisewear. Its main keywords are freedom, fit, performance and responsibility. Among the brands recurring to this application we can find:

- Edelvissa is an emerging all-Italian brand, born in the heart of Milan. The designer Elisabetta Bianco, who grew up under the wings of her grandfather and father, both expert knitters, decided to found a reality that would fully represent her vision of luxury homewear. Flanked by her partner and her brother, Elisabetta created a brand with a transparent soul, based on the quality of materials, complete product traceability and social and environmental sustainability. From the heart of Milan, Edelvissa aims to share the centuries-old textile culture and the high Italian craftsmanship tradition. In its first collection, a crop top with a beautiful embroidery of blooming flowers and a pair of comfortable, yet stylish leggings are both crafted from a Maglificio Ripa fabric developed with Q-NOVA® BY FULGAR recycled polyamide and ROICA™ EF* recycled stretch yarn, both GRS certified. Maglificio Ripa is a premium partner of ROICA™.

- Scott Racing Team: A partnership born in 2019 and celebrated at Ispo 2020, based on two premium partnerships: Rosti for the style and manufacturing, ROICA™’s partner Sitip for technical fabrics made from GRS (Global Recycled Standard) certified recycled yarns including ROICA™ EF*, the certified recycled stretch ingredient produced by Asahi Kasei. A synergy that has given life to high-tech clothing, customized for this team able to face the climatic conditions and the performances necessary to face the activity in the summer season: light resistance as well as maximum comfort. In addition to the values of sustainability, high performance, breathability, comfort on the skin, shape  retention and resistance, ease of maintenance, style and ergonomics, there is now the commercial distribution of the uniform, which finally passes from the team to the end consumer who can purchase it exclusively on the Rosti e-shop.

• Currency-neutral sales up 3%, despite € 600 million drag from external factors*
• Strong top-line momentum in EMEA, North America and Latin America with double-digit
• increase across these regions*
• DTC business growing at double-digit rate in EMEA, North America and Latin America*
• Gross margin at 50.1% as significantly higher full-price sales partly compensate
• negative currency impact and higher supply chain costs*
• Operating margin at 11.7% despite strong double-digit increase in marketing spend*
• Net income from continuing operations reaches € 479 million*
• Inventories down 23% currency-neutral*
• 2021 top- and bottom-line outlook confirmed*

“adidas performed well in an environment characterized by severe challenges on both the supply and demand side,” said adidas CEO Kasper Rorsted. “As a consequence of successful product launches we are experiencing strong top-line momentum in all markets that operate without major disruption. Double-digit growth in our direct-to-consumer businesses in EMEA, North America and Latin America is a testament to the strong consumer demand for our products. At the same time, we are navigating through the current world-wide supply chain constraints. Despite all challenges, we are on track to delivering a successful first year within our new strategic cycle.”
 

*See attached document for more information.

Fashion 4 Development and C.L.A.S.S. Eco Hub are pleased to announce the launch of their digital platform called “The Reclothe’s Platform”. The digital platform, which is a joint venture between the two companies, is expected to add significant value to all the stakeholders in the fashion and lifestyle industry. The core objective of the Reclothe’s Platform is to be a one-stop source of information and guide for professionals and students in the fashion and lifestyle industry.

The ReClothe platform will feature current innovators highlighting the practices & solutions for textile and manufacturers, pushing the industry towards a greener and more sustainable standard. The platform will lead members into scalable and more responsible manufacturing processes, driving responsible innovation practices across all aspects of the supply chain, measured and proved.
 
The joint venture was created in 2021 by Fashion 4 Development and C.L.A.S.S. Eco Hub to support the United Nations Office of Partnerships for the Sustainable Development Goals. Both Fashion 4 Development and C.L.A.S.S. Eco Hub are recognized for their experiences working from broad perspectives to advance the sustainability transformation

As one of the driving forces helping to create a fully circular fashion industry, ISKO has partnered with Swedish research and development company MoRe Research, a part of RISE Research Institutes of Sweden, to investigate and develop new, sustainable technologies made from cellulosic-based materials, derived from waste textiles, for the company’s 25,000+ range of products. It is hoped that this research will also help make the production of cellulose-based materials more sustainable.

The work with MoRe Research feeds into ISKO’s Responsible Innovation™ strategy and will link with various sustainability projects the company is working on. For example, ISKO recently signed an agreement with HKRITA to license its Green Machine – a unique technology that fully separates and recycles cotton and polyester blends at scale.

ISKO will leverage MoRe Research!s expertise and resources to find ways of repurposing the clean and toxic-free cellulose powders that are created from the decomposed cotton, as well as the recycled polyester and reintegrate this back into fabric production. By using all of the outputs from the recycling of textiles back into textiles, the prospect of a closed-loop system becomes more feasible.

The investment in this new technology is the latest in ISKO’s ongoing drive for advancements in sustainability. As part of the company’s R-TWO™ program ISKO is also working to develop fabrics with a guaranteed minimum +50% GRS (Global Recycle Standard) recycled content blend. This will significantly reduce the carbon and water footprint of a fabric, as well as make it easy to trace a garment’s sustainable journey step-by-step from the beginning of the supply chain through to the end product.

SUPREME GREEN COTTON®, the water-saving smart-tech yarn by Varvaressos has been chosen by Diesel, Champ Blanc and Muntagnard, and won the Gold Award at the Greek Exports Forum & Awards 2020.

Thanks to a pioneering satellite-powered drip irrigation system, SUPREME GREEN COTTON® saves up to 40% of water. The range of yarns is entirely Made in Europe and comes with influential sustainable verifications. The MADE IN GREEN by OEKO-TEX® label guarantees that the yarns have been tested for harmful substances and manufactured using sustainable processes under socially responsible working conditions in accordance with STeP by OEKO-TEX®. Complete transparency and traceability are guaranteed throughout the whole production and supply chain by the unique diafania SI platform, powered via blockchain technology.

Global clothing and lifestyle Italian premium jeans brand Diesel stands out for its unique mindset and sustainable imprint. That’s why it chose SUPREME GREEN COTTON® for its collection ‘Green Label’ and ‘NightCrush’ as well as its ‘Malign’ jersey T-shirts, available in two different colours and prints.

Thee Swiss brand Muntagnard believes in «sustainability» as a powerful lever for innovative solutions for people who go their own way and think outside the box to advance sustainable development. Muntagnard rethinks textiles - from the sewing thread to the label – selecting only sustainable materials and minimizing the use of plastic to the bone while seeking sensible, biodegradable textile alternatives. The MANGOLA collection of T-sets is 100% made of SUPREME GREEN COTTON®.

CHAMP BLANC is a responsible French brand renown for its ready-to-wear men clothing and for its strong commitment to traceability. The brand has been working for nearly 8 months on the design of the "Traceable T-shirt" made of 100% SUPREME GREEN COTTON®. The result is a high quality and finishing t-shirt to make it last. By relying on existing technologies, the entire production chain is traceable and can be discover thanks a QR-code on the label.

SUPREME GREEN COTTON® has also been bestowed with the influential Gold Award in the “Top Branded Export Product” category of the Greek Exports Forum & Awards 2020

• Global online fashion retailer and UK supplier - Asos and Fashion-Enter Ltd. - teaming with Kornit for adoption of efficient, low-impact direct-to-fabric digital textile printing with zero water waste and accelerated production speeds

Kornit Digital (Nasdaq: KRNT), a worldwide market leader in digital textile printing technology, announced that global online fashion retailer ASOS and its supplier Fashion-Enter Ltd. are implementing Kornit Presto to explore the future opportunities presented by on-demand manufacturing.

Kornit Presto is the most advanced single-step solution for direct-to-fabric printing, enabling Fashion-Enter Ltd. to rapidly deliver test-and-repeat small product runs on behalf of ASOS. These production capabilities will enable ASOS and Fashion-Enter Ltd. to imprint designs on multiple fabrics at the push of a button, through a lower-impact production process that has zero water waste and accelerates production speeds by cutting out typical dyeing processes.

In Kornit’s pigment-based digital textile production capabilities and efficient workflow solutions, Fashion-Enter Ltd. sees an answer for brands serving the needs of today’s consumers, while reducing inventory waste and improving supply chain management and garment quality.

SUPREME GREEN COTTON® has been chosen by the Italian brand Diesel for the ‘Green Label’, ‘NightCrush’ and ‘Malign’ jersey T-shirts. From cotton seed to fiber, yarn production, fabric and final garments, the full supply chain is not just transparent but located in a very focused area 100% in Greece.
 
SUPREME GREEN COTTON® is the premium quality smart yarn collection by Varvaressos S.A. European Spinning Mills. The Greek yarn manufacturer has developed an innovative and socially responsible system from the seed to the garment that supports farmers and businesses at the foothills of Mount Olympus.
 
SUPREME GREEN COTTON® uses a customized satellite-powered drip irrigation system in the fields that allows saving up to 40% of water. Water usage is one of the pressing issues in cotton production. Thanks to the advanced drip irrigation system, plants are watered and fed without wasting a single drop. Thanks to a custom-developed app connected via satellite and meteorological stations in selected cotton fields, farmers can monitor the fields in real time. The IoT – Internet of Things system warns them to take action to ensure plants to flourish healthily and high a higher yield in a sustainable way.
 
The smart yarns are Made in Greece and have been certified by MADE IN GREEN by OEKO-TEX® which assures transparency and traceability, moreover the company has also obtained the STeP by OEKO-TEX®.