Adidas, a quarterly nightmare: profits slump, from 631 down to 20 million euros

Adidas, a quarterly nightmare: profits slump, from 631 down to 20 million euros

Adidas, what a quarterly nightmare: sales have been dropping by 19% and profits have slumped, down 97%. The second quarter of the year will supposedly be even worse: in fact, they expect the downturn in sales to be higher than 40%, therefore bringing about a negative operating result.

The company publicly stated that 60% of their activities are currently at a standstill: over 70% of their selling stores, all over the world, are closed. Adidas announced they have already lost more than 1 billion euros, in terms of revenues from sales, in April.

What a quarterly nightmare

Results achieved by Adidas in the first quarter of the year turn out to be worse than expected. Revenues dropped by 19%, down to 4.753 billion euros (Adidas brand sales down 20%, while Reebok sales down 12%). Sales in China slumped by 58% (that is, 800 million euros less): the company stressed the fact they have not enjoyed, for the time being, a full rebound in this market.

“Although customers have been showing up back in stores, they have not been up to shopping as they used to prior to the crisis”, said Kasper Rorsted, Adidas Chief Executive Officer, while emphasizing, at the same time, he is confident in a full recovery within the end of the second quarter.

Profits down 97%

Although overall online sales have been rising by 35%, they have not fully offset the collapse of in-store sales, whose income contribution proves to be still limited. In fact, in 2019 they used to account just for 13% of total earnings, reported Reuters. As regards net profits, from periodic deals, they slumped by 97% in the first quarter: from 631 down to 20 million euros.

One more figure leaping out is about the increase in the value of unsold stock: 4.334 billion euros at the end of March. In other words, +32% at current rates of exchange and +36% at fixed rates of exchange.

The second quarter will go even worse

The German group have announced they cannot provide any forecast about 2020 business trend. Yet, according to their estimates, in the second quarter the pandemic detrimental effects will be heavier than the ones affecting the first quarter business, as downturn in sales, at fixed rates of exchange, will expectedly exceed 40%. Besides that, the operating result is going to be negative.

“Despite the current situation – commented Kasper Rorsted – I am confident about a long-term recovery. Buyers are gradually becoming keener on wellness. They want to keep fit and healthy by playing sport. That is why we are now striving hard to enhance, as fast as possible, our retail and digital sales business: such efforts will prove even more rewarding in the future. Our standing, as a global company dealing with strong brands, is sound”.

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