Adidas reported weak results for Q1 and said Q2 is expected to be worse on the top and bottom line.
During the first two months of the quarter, sales outside of Asia Pacific rose 8%. But sales in Asia Pacific declined 45% due to impacts from the coronavirus, with sales in Greater China down 58%.
The declines in Asia followed by subsequent shutdowns in other parts of the world in March, led to a 19% overall decline in total company revenue during the quarter.
E-commerce was a bright spot, rising 35% for the quarter. In March, when more countries began lockdowns, e-commerce sales surged 55%.
In China, the company took back a lot of product to manage inventory in the marketplace in the triple digit million Euros range. That, in concert with cancelled product orders and an increased allowance for bad debt, led to a 93% decline in operating profit.
Net income declined 97%.
Adidas ended the quarter with inventory up 32%.
While sales in China continue to recover and e-commerce sales continue to surge, 70% of company owned stores are closed around the world. For those and other reasons, the company expects significant declines in Q2.
“Both top- and bottom-line declines in the second quarter of 2020 are currently expected to be more pronounced than those recorded in the first quarter, with currency-neutral sales projected to come in more than 40% below the prior year level and the operating result to be negative,” Adidas said in a statement.
The company declined to given guidance for the full year given the uncertainty surrounding the virus.
