China's services sector contracts for second month
New York (CNN Business)Tripped-up supply chains and a coronavirus surge in China are causing headaches for top athletic brands.
Under Armour (UA) tumbled 25% Friday after the company posted a $60 million loss during its most recent quarter due to supply chain delays and recent Covid-19 lockdowns in China.
Chinese authorities imposed a lockdown in Shanghai, China’s financial hub, in late March following a surge in coronavirus cases. Although the government started to lift some restrictions last month, more than 8 million residents are still banned from leaving their residential compounds.
Under Armour warned that pressures in Asia will continue to hurt its business this year.
“These trends, which we believe to be temporary, are also expected to impact how  is shaping up,” Under Armour CEO Patrik Frisk said on an earnings call with analysts Friday.
Meanwhile, Adidas (ADDDF) on Friday also said its profit fell last quarter. The sportswear giant reported a net profit of $327 million last quarter, down 38% from the same stretch a year ago.
Adidas said the decline was caused by a “challenging market environment” in China, where sales fell 35%, as well as supply chain disruptions.
“Revenues in Greater China are now expected to decline significantly in 2022,” Adidas said. The company’s stock fell 5% Friday.
Under Armour’s and Adidas’ sluggish results and forecast dragged down other big sportswear brands, including Nike (NKE) and Lululemon (LULU). Nike was off 3% and Lululemon dropped 7% Friday. China is a key market for these companies and their supply chain networks also rely heavily on the Asia-Pacific region.
Although these brands have been raising prices to combat higher costs, they say consumers are still eager to buy their gear.
“The underlying demand for the brand is there. The brand is getting stronger,” said Under Armour’s Frisk.
— CNN Business’ Anna Cooban contributed to this article.
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