Profits plunge 93% at sportswear giant Adidas

Sportswear giant Adidas reported a 93 per cent plunge in first-quarter profit and a 19 per cent fall in sales, missing forecasts, and warned of a deeper hit to second-quarter revenue as lockdowns forced the company to close stores.

First-quarter operating profit fell to €65 million, well short of the €263 million expected by analysts. Adidas said it had taken a hit of around €250 million on unsold stock in greater China, purchase order cancellations and higher bad debt provisions.

Sales fell 19 per cent to €4.75 billion versus a €4.85 billion forecast by analysts, Refinitiv Eikon data showed, and the company warned of a possible 40 per cent fall in the seond quarter.

Adidas shares were down 1.2 per cent in early trade and have fallen more than a third since the coronavirus pandemic started.

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It said it could not provide an outlook for the year given the uncertainty over when closed stores might reopen.

Adidas said more than 70 per cent of its stores were currently closed worldwide, with a 35 per cent rise in e-commerce in the first quarter only partially offsetting that.

In the first three weeks of April, it said sales in China had continued to recover as stores reopened there.

Rival Nike last month beat estimates for its third quarter ended February 29th, with revenue up 5.1 per cent as strong online demand offset lower sales in China.

Adidas said it had a cash position of €1.975 billion at March 31st. It received approval for a €2.4 billion government-backed loan on April 14th to help it through the crisis and is reportedly planning a bond to replace it. – Reuters