Adidas reports strong 2019 but warns on coronavirus impact

Global sports brand Adidas said today (11 March) that its direct-to-consumer (DTC) business, including its eCommerce operations, helped drive strong growth in sales and profit in 2019.

Currency-neutral revenues increased by 6% year on year, while the company experienced double-digit sales growth in Greater China and eCommerce – two areas of particular focus for the business. Operating margin expanded to 11.3%, while net income from continuing operations jumped by 12% to €1.92 billion.

Adidas said 2019 Asia-Pacific sales were up by 10% year on year, driven by a 15% increase in Greater China, and a 13% hike in emerging markets, while the North American business experienced an 8% sales imporvement despite supply chain shortages weighing heavily on the region’s growth in the first half of the year.

Latin America revenues were up by 7%, the Russia/CIS division saw an 8% rise, and Europe returned to growth with a currency-neutral sales increase of 3%. Adidas opened its most digital store ever, in London, last year, introducing a range of new technologies in the shop.

Kaspar Rorsted, CEO of Adidas, said the company was aiming for a sixth consecutive year of double-digit bottom-line growth, in 2020. However, the ongoing spread of the coronavirus, Covid-19, which has now been classed as a pandemic, is clearly a cause for concern.

“Following the outbreak of the coronavirus, our business in Greater China has experienced a significant negative impact since Chinese New Year,” Rorsted noted.

“As the situation keeps evolving, we cannot yet reliably quantify the magnitude of the overall financial impact in 2020. Regardless of the impact on our business, it remains our top priority to ensure the health and safety of our employees and their families."

Revenues in Greater China have been around 80% below the prior year level between Chinese New Year on 25 January and the end of February, as shops have closed at footfall has been hugely impacted by restrictions on movement in the wake of the coronavirus.

Adidas said that, since the outbreak, it has worked closely with its wholesale partners to ensure inventory levels remain “healthy in the market".

“This resulted in the cancellation of all shipments in February and could lead to the acceptance of a significant amount of product takebacks, which the company plans to clear through its own channels throughout the remainder of the year,” the company added.

“Based on the latest information available, the company expects revenues in Greater China in the first quarter of 2020 to be between €0.8 billion and €1 billion below the prior year level. Consequently, operating profit in Greater China is anticipated to decline between €0.4 billion and €0.5 billion in the first quarter."