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Aug 6, 2020
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Adidas predicts profit rebound after pandemic struggles

Reuters API
Aug 6, 2020

German sports giant Adidas said on Thursday it expects to bounce back to profitability in the third quarter after it plunged to a big loss in the second quarter when the majority of its stores were closed due to coronavirus lockdowns.


Shares in the company, which are down 17% this year, rose nearly 4% in early trading.

Adidas reported a second-quarter operating loss of €333 million (£301.16 million) worse than the €290 million expected by analysts on sales down 35% to €3.579 billion, ahead of analyst consensus for €3.3 billion.

But Jefferies analyst James Grzinic said the sales decline was much less than feared in Europe and North America — down 40% and 38% respectively — as Adidas was supported by its strong e-commerce operation, although Asia was weaker than he expected.

Adidas said its sales were flat for the second quarter in China, where it saw double-digit growth in May and June.

The quarterly loss included coronavirus-related charges of around €250 million, mainly due to an increase in inventory and bad debt allowances, as well as the impairment of retail stores and the trademark of its struggling Reebok brand.

Inventories hit €5.2 billion at the end of June, up 20% from the end of March.

Adidas expects a material improvement in third-quarter sales assuming there are no new major lockdowns, but still down on 2019 by a mid-to-high single-digit rate.

It sees an operating profit of between €600 million and €700 million in the period. It declined to give an outlook for the full year.

“We are now seeing the light at the end of the tunnel as the normalisation in the physical business continues,” Chief Executive Kasper Rorsted said in a statement.

E-commerce sales jumped 93% in the quarter and remained at a very high level even as stores started to reopen, with 92% already back in business, albeit with reduced opening hours.

Rivals Nike and Puma also reported quarterly losses, while Nike saw a 75% rise in online sales.

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