Ecommerce sales rise 51% but Q4 revenue expected to drop amid second wave.
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- Currency-neutral revenues in Q3 down 3% to €5.96bn
- DTC business grows 13% and accounts for 35% of total sales
- Low to mid single-digit revenue decline projected in Q4
Adidas has reported a much-improved third quarter as it continues to recover from the coronavirus pandemic, including a 51 per cent year-on-year uplift in ecommerce sales, but has provided a cautious outlook for the remainder of 2020 as Covid-19 cases continue to surge.
The Germany-based sportswear giant’s currency-neutral revenues for the three months to 30th September were down slightly to €5.96 billion (US$7.04 billion), a three per cent drop from €6.41 billion for the same period in 2019.
Net income from continuing operations came in at €578 million (U$682.7 million), down from €644 million in 2019, while the company’s gross margin was 50 per cent, down from 52.1 per cent in 2019.
Nevertheless, Adidas' overall direct-to-consumer (DTC) business, which includes ecommerce and company-owned and operated retail outlets, grew 13 per cent in currency-neutral terms and accounted for 35 per cent of total sales in the quarter.
The group's increased ecommerce business, including a marked rise in full-price sales, is in line with the results reported by its chief rivals, with Nike and Puma also seeing dramatic growth in online sales this year.
Two-thirds of Adidas’ online sales in Europe and the United States came through the company’s loyalty programme, which now boasts 150 million members.
Adidas said more than 90 per cent of its owned retail stores are now operational after more than 70 per cent were forced to close during the height of the pandemic. While footfall remains significantly below prior year levels, customer conversion rates are higher, the company said.
Adidas’ Q3 earnings mean the group’s revenue for the first nine months of 2020 fell by 18 per cent on a currency-neutral basis to €14.297 billion, down from €17.802 billion in 2019.
While its Q3 operating profit dropped 12 per cent to €794 million, the company noted that the figure represents an improvement of more than €1.1 billion versus Q2 2020.
The release of Adidas’ Q3 earnings followed reports the company is mulling a cut-price sale of Reebok, the Boston-based brand it bought for US$3.8 billion in 2006, amid growing pressure from shareholders.
Private equity firms Permira and Triton are said to be exploring a possible acquisition, with Kasper Rorsted, Adidas’ chief executive, accepting his company may be forced to settle for less than €2 billion (US$2.3 billion) to offload a brand it has struggled to rejuvenate over the past 14 years.
In Q3, Reebok’s revenues dropped seven per cent, while its revenues for the first nine months of 2020 declined 20 per cent.
Looking ahead to Q4, Adidas said ‘uncertainties around the further development of the coronavirus pandemic as well as the global macroeconomic environment remain high’, and new lockdown measures in several countries have forced further store closures.
As a result, the company predicts that its top line will ‘develop similarly in Q4 as it did in Q3, implying a low- to mid-single-digit currency-neutral revenue decline’.
For Q4, operating profit is anticipated to be between €100 million and €200 million, assuming no additional major lockdowns are implemented and at least 90 per cent of Adidas stores remain 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. However, this is not taking us by surprise,” said Rorsted.
“Thanks to our prudent approach, we are now well-prepared to cope with these short-term uncertainties. At the same time, we are even better positioned to benefit from the long-term industry growth drivers accelerated by the pandemic such as health and wellbeing, athleisure and digitisation.”
November 11, 2020 at 07:01PM
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Adidas posts improved Q3 earnings but warns of further Covid-19 hit - SportsPro Media
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