70% of Adidas stores remain closed

Worldwide
Published:  29 April, 2020

The international sportswear Group said the coronavirus pandemic has weighed heavily on its first quarter results.

Adidas has attributed the 19% decline in its first-quarter currency-neutral revenues (€4.753 billion) to the global coronavirus outbreak, which led to a significant number of store closures, both owned and partner-operated, and a pronounced traffic reduction within the remaining store fleet. However, there was a continued strong currency-neutral growth of 35% in e-commerce; the only channel that has remained fully operational in most parts of the world, and which could only partially offset the material revenue decline in the physical channels. The adidas brand recorded a 20% sales decline in the quarter, while Reebok sales were down 12%.

According to the Germany headquartered sportswear Group, the significant revenue declines it has been experiencing in Greater China since the end of January, as well as in Japan and South Korea in March, drove the combined currency-neutral sales of the adidas and Reebok brands in Asia-Pacific down by 45%. Prior to the global spread of the coronavirus, Adidas said it had recorded currency-neutral revenue growth of 8% outside of Asia-Pacific for the first two months of 2020. The negative impacts from the subsequent closures are said to have offset these sales increases, thereby significantly weighing on the first quarter sales developments in Emerging Markets (-11%), Europe (-8%), Latin America (flat), North America (+1%) and, to a lesser extent, in Russia/CIS (+9%). 

Gross margin decreased 4.2 percentage points to 49.3% (2019: 53.6%) in the first quarter of the year, and operating profit was down 93% to €65 million (2019: €875 million), representing an operating margin decline of 13.5 percentage points to 1.4% (2019: 14.9%). Net income from continuing operations decreased 97% to €20 million (2019: €631 million), with basic EPS from continuing operations declining to €0.13 (-96%) year-over-year (2019: €3.17). “Despite the current situation, I am confident about the attractive long-term prospects this industry provides for adidas. Consumers are developing an increased appreciation of well-being. They want to stay fit and healthy through sports. Our focus on accelerating our own-retail and digital business will serve us even better in the future. We are well positioned as a global company with strong brands”, said Kasper Rorsted, CEO, Adidas.