Adidas cautious for year end as pandemic returns

FILE PHOTO: Adidas' 70th anniversary in Herzogenaurach

By Emma Thomasson

BERLIN (Reuters) – Adidas <ADSGn.DE> expects sales to fall in the last three months of the year as coronavirus lockdowns return in Europe and despite forecasting a return to growth in China and strong demand for running gear and products designed by singer Beyonce.

Third-quarter sales fell by a currency-neutral 3% to 5.96 billion euros ($7.05 billion), while operating profit fell 12% to 794 million euros, ahead of average analyst forecasts for 5.91 billion and 723 million euros respectively.

Adidas expects a similar level of sales decline in the fourth quarter as long as more than 90% of its stores stay open and shopper numbers are not hit too much by new lockdowns. About 93% of its global stores are currently open, but only 60% in Europe.

The German sportswear firm said it expects a fourth-quarter operating profit of between 100 million and 200 million euros, lower than most analysts were expecting.

“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,” Chief Executive Kasper Rorsted said in a statement.

Adidas shares, which jumped on Monday on a COVID-19 vaccine breakthrough, traded down 5.55% at 1032 GMT.

“The short-term outlook appears less constructive given the current shape of demand and a rebuild in costs,” Jefferies analyst James Grzinic wrote in a note.

Rorsted declined to comment on a recent magazine report that Adidas might sell its struggling Reebok brand, pointing only to a new five-year strategy he plans to present on March 10. Reebok sales fell 7% in the quarter.

Adidas predicted a return to growth in greater China in the fourth quarter, even though the year-ago period was strong, with Rorsted saying he was upbeat for the country’s annual Singles’ Day ecommerce shopping event on Wednesday.

Sales of Ultraboost running shoes are strong as more people go jogging during the pandemic, while collections Adidas is releasing with Beyonce are also in high demand.

Ecommerce sales jumped 51%, with two-thirds of online sales in Europe and the United States coming through its loyalty programme, which now has 150 million members.

Adidas said it had replaced a loan from Germany’s state-backed bank KfW with a 1.5 billion euro syndicated loan from partner banks, which finance chief Harm Ohlmeyer said might mean it could pay a dividend for 2020.

(Additional reporting by Alexander Huebner; Editing by Michelle Adair, Kirsten Donovan)