Adidas Swings to Loss But Sees Recovery Under Way--Update
By Ruth Bender
BERLIN -- Adidas AG Thursday said it expects revenue to recover
as the German sports-gear group's stores continue to reopen and
digital sales thrive after the coronavirus lockdowns pushed the
company into a net loss in the second quarter.
The world's second-largest athletic gear maker by revenue after
Nike Inc. had warned of an even greater hit to sales and profit in
the second quarter due to the measures that were taken to contain
the spread of the virus around the world.
Adidas swung to a net loss of EUR295 million ($350 million) in
the second quarter compared with a profit of EUR531 million in the
same quarter a year ago, while revenue fell 35% to EUR3.58 billion
from EUR5.51 billion during the same period. Adidas said strong
online sales growth couldn't offset the loss incurred by the
closure of 70% of its stores during the peak of the pandemic. It
had warned that sales could drop as much as 40% in the quarter.
The company saw the sharpest drop in sales in Latin America and
emerging markets, where they fell over 60% in the quarter. Sales in
North America fell 38% and by 40% in Europe, Adidas said. In
Greater China, its biggest individual market, sales were flat in
Adidas shares rose 3% in early morning trade as the revenue drop
was better than what analysts had expected.
Adidas said revenues started to improve again toward the end of
the second quarter with some 83% of Adidas stores operational again
at the end of June, albeit partly with reduced hours. While traffic
in stores remains below prior year levels, those people who do
visit stores tend to spend more, Adidas said.
"We are now seeing the light at the end of the tunnel," said
Chief Executive Kasper Rorsted, who this week was extended at the
helm for another five years until July 31, 2026.
Puma SE, Adidas's smaller German rival, last month also pointed
to the beginning of a recovery. After a 55% drop in sales in April,
Puma said sales in July were flat again.
Online sales have helped Adidas and other retailers cushion some
of the declines this quarter. Sales through Adidas's own e-commerce
channels rose 95% in the quarter as consumers shifted to remote
purchases during the pandemic. In April and May, online sales grew
at a triple-digit rate and have remained strong even as stores
reopened, boosted by increased investments into marketing products
online and Adidas's supply chain, the company said.
Adidas has faced stark criticism in recent months about its work
culture and lack of diversity amid the Black Lives matter movement,
leading to the company's global head of human resources retiring in
Adidas said it expects sales to improve materially in the third
quarter but to still be down at a mid-to-single-digit rate compared
with the same period last year.
Operating profit is projected to swing back to a profit in the
third quarter of between EUR600 million and EUR700 million,
provided there are no further lockdowns if infections flare up
again, Adidas said.
Write to Ruth Bender at Ruth.Bender@wsj.com
(END) Dow Jones Newswires
August 06, 2020 03:47 ET (07:47 GMT)
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