Tuesday, 10 November 2020

Adidas cautiously upbeat for year-end despite pandemic resurgence

German sportswear firm Adidas expects sales to decline in the last three months of the year despite forecasting a return to growth in China, as coronavirus lockdowns return. Third-quarter sales fell by a currency-neutral 3% to €5.964 billion (£5.35 billion), while operating profit fell 12% to €794 million, ahead of average analyst forecasts for €5.91 billion and €723 million respectively.

Adidas expects a similar level of sales decline in the fourth quarter based on more than 90% of its stores staying open and shopper numbers not being hit too much by new lockdowns. About 93% of the stores are currently open.“While at the beginning of the quarter we were on track for growth in Q4, a worsening of the pandemic in many regions of the world is again requiring our patience and support,” Chief Executive Kasper Rorsted said in a statement.

“The short-term outlook appears less constructive given the current shape of demand and a rebuild in costs,” Jefferies analyst James Grzinic wrote in a note.

Sales of the Reebok brand fell 7%. Adidas has declined to comment on a magazine report earlier this month that it is planning to sell Reebok, which has struggled since being bought by Adidas in 2005.

Adidas predicted a return to growth in greater China in the fourth quarter, even though the year-ago period was strong, and said it expects a fourth-quarter operating profit of between €100 million and €200 million.

Sales rose 4% in Europe in the third quarter but fell 1% in North America and 5% in greater China as initial pent-up demand faded after coronavirus restrictions were lifted. Ecommerce sales jumped 51%.

German rival Puma reported a strong rebound in third-quarter sales in the Americas and Europe.

Adidas also said it had replaced a loan it secured during the early stages of the pandemic with state-backed bank KfW with a €1.5 billion syndicated loan with partner banks.

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