Adidas Reports Massive Losses in China amid Forced Labor Boycott in Xinjiang
15% drop in profits in the third quarter
German company Adidas announced plummeting profits in China following boycotts by consumers amid protests against human rights abuses in Xinjiang.
Adidas is reporting a 15% drop in profits in the third quarter from Mainland China, Taiwan, and the city-state of Hong Kong.
The Wall Street Journal reported a 16% drop in the second quarter.
The current 5% drop in share prices was due to supply chain issues and factory closures in Vietnam, resulting in a $1.2 billion sales loss, Reuters reported.
But many companies remain loyal to the Chinese market.
H&M recently pulled out of Xinjiang in 2020 over forced labor of the Uyghur Muslim minority.
Adidas and Nike are both parts of the Better Cotton Initiative, a program working to produce ethical cotton.
In July, the Senate successfully passed the Uyghur Forced Labor Prevention Act aiming to ensure American interests are not funding human rights abuses in China.
But several companies, including Coca-Cola and Nike, sought to change the language in the act, arguing it would weaken the supply chain.
Nike said in a statement:
“Nike is committed to ethical and responsible manufacturing, and we uphold international labor standards. We are concerned about reports of forced labor in, and connected to, the Xinjiang Uyghur Autonomous Region (XUAR).
"Nike does not source products from the XUAR, and we have confirmed with our contract suppliers that they are not using textiles or spun yarn from the region.”
Following the boycott, sales slumped for Adidas by 79% and 59% for Nike on the Chinese mega-company Alibaba’s online store.
“It’s kind of a lose-lose situation,” Ingo Speich, head of sustainability and corporate governance at German fund manager Deka Investment told the WSJ.
“The key will be to show consumers our appreciation and respect, to earn their loyalty and complement our global brand strength with a strong local angle and understanding,” said Adidas Chief Executive Kasper Rorsted to reporters.
Millions of Uyghurs have been detained in camps in Xinjiang, according to Axios.
China also seeks to assimilate Uyghurs by removing their native Turkic language, The Diplomat reported.
Earleir this year, Nike CEO John Donahoe praised China, saying his sportswear company is "a brand that is of China and for China.”
During the phone conference on Nike’s fourth-quarter earnings report with Wall Street analysts, Donahoe made it clear where his company's loyalty was.
Donahoe told analysts that recent revenues doubled to $12.3 billion, which exceeded all expectations, according to the BBC.