Adidas on Monday reported plunging sales and profit in the first quarter, and, blaming the pandemic, warned the current quarter is likely to be worse. Revenue in the quarter fell 19% to €4.75 billion ($5.15 billion at press time), with Adidas down 20% and Reebok down 12%.
Currency-neutral e-commerce sales rose 35% but the digital strength couldn’t make up for store declines, the company said. More than 70% of the company’s stores remain closed worldwide.
Net income from continuing operations in the quarter plunged 97% to €20 million, according to a company press release. Operating profit fell 93% to €65 million, representing an operating margin decline of 13.5 percentage points to 1.4%, from 14.9% last year.
The pandemic is keeping shoppers out of stores and out of the gym, and leading several brands, including Adidas, to withdraw their outlooks for the year after a brutal first quarter.
Unsurprisingly, the retailer's first quarter declines were seen mostly in Greater China as well as in Japan and South Korea, as COVID-19 first spread in that region early in the year. That drove "currency-neutral sales of the adidas and Reebok brands in Asia-Pacific down by 45%," with a 58% sales decline in Greater China alone. Outside of that region, before stores also closed elsewhere, the company recorded currency-neutral revenue growth of 8% for the first two months of the year. As stores shuttered, revenues took a hit overall in the quarter: in emerging markets by 11% and Europe 8%, with sales in Latin America flat, and up 1% in North America.
It doesn't help that team sports, as entertainment and recreation, are a no-go at the moment. And, while many people are streaming virtual exercise classes and are allowed to run and bike outside even under stay-at-home orders, that doesn't appear to be fueling sales of athletic wear. One item that appears to have been spared declines is sweatpants: Those sales grew in the low singles, while most athletic categories experienced declines including other pants and shorts, sweatshirts, knit shirts, outerwear tops, socks, bras, and swimwear, according to NPD Group's first quarter athletic apparel recap.
Still, as prolonged as the pandemic effect has been, and even as he braces for further declines this year, Adidas CEO Kasper Rorsted in a statement said he believes that a longer-term appreciation for health and wellness will help the company stage a comeback — a notion shared by some observers. "Consumers are developing an increased appreciation of well-being," he said. "They want to stay fit and healthy through sports."