What's going on?

Adidas reported a drop-off in quarterly sales on Friday, after the German sportswear giant found itself a bit light on� well, everything.

What does this mean?

China was once touted as a hotbed of opportunity for Adidas, but it�s been causing one headache after another lately: first a year-long boycott of the company�s products, now a series of lockdowns that have kept its stores shut. Lockdowns in Vietnam have been just as problematic, mind you, with Adidas�s manufacturing hubs grinding to a halt and leaving it short on stock. That�s a disruption that the company reckons added up to about $420 million in lost sales last quarter.

All this chaos dragged down Adidas�s currency-neutral sales � which strip out the effect of currency swings � by 3% from the same time the year before. And while it�s expecting sales to grow again this quarter, the company doesn�t have such high hopes for profit: it cut its target for the year, and investors sent its stock down 5%.

Why should I care?

The bigger picture: Adidas wastes not, wants not.
Adidas is the world�s second-biggest sportswear company after Nike, but it�s not above taking its rival�s hand-me-downs. See, Nike has been moving away from third-party sellers, with Foot Locker recently acknowledging that sales of Nike products will make up around 20% less of its total sales than they did in 2020. Foot Locker, then, announced that it�d stock more of Adidas�s gear instead, with the aim of tripling the company�s product sales in its stores by 2025.

Zooming out: China�s nothing if not stubborn.
Adidas lowered its profit target partly because it thinks the China situation will continue for some time, and it has a point: the government doubled down on its zero-Covid policy late last week, despite the damage it�s doing to the country�s economy (tweet this). Data out last week, for instance, showed that the country�s services sector suffered its second-biggest contraction since the start of the pandemic last month.