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Adidas expects recovery in third quarter | News and analysis

HERZOGENAURACH, Germany – Adidas AG sales are recovering faster than expected after global store closings, with a wave of e-commerce helping the German sportswear company bypass Covid-19 lockdowns.

Total sales were better than analysts had expected in the past three months, and the company said the store business is starting to return to normal. Third quarter sales are expected to continue to decline by one to one percentage point from a medium to high percentage year-on-year, but better than the 34 percent collapse in the second quarter.

Shares rose 1.3 percent in early Thursday in Frankfurt, limiting this year’s decline to 16 percent.

After closing 70 percent of its stores worldwide due to the pandemic, Adidas is struggling with the new normal between online shopping and physical retail, as it strives to revive growth. With more than nine out of ten stores open worldwide, fewer customers are entering, but a higher percentage is buying.

“We are now seeing the light at the end of the tunnel,” CEO Kasper Rorsted said in a statement. “From everything we know today, our recovery will continue in Q3.”

The company said there is still too much uncertainty about the pandemic, the pace of shopping in reopened stores, and the global economy to provide a year-round forecast. While China is seeing double-digit growth again – in part thanks to the lifting of the lockdowns in March – North America and Latin America are still experiencing disruptions as the corona virus rages.

Adidas also has other challenges. After cutting costs and taking advantage of the strong demand for retro shoes, Rorsted needs to tap into his creative side as Adidas prepares to unveil a new strategy cycle towards 2021.

And while Rorsted has just agreed to a five-year contract extension, he’s under increasing pressure to create more opportunities for minorities and women. The human resources chief of Adidas recently resigned after complaints from black workers about her approach to diversity issues.

Second quarter revenues of € 3.58 billion ($ 4.25 billion) were above analyst estimates of € 3.24 billion. E-commerce almost doubled in the period.

Adidas said it expects Q3 operating profit to turn between € 600 and € 700 million – another improvement after a loss of € 333 million by that measure in the second quarter.

By Tim Loh.