Adidas Warns That Worsening Pandemic Will Weigh on Earnings -

Adidas Warns That Worsening Pandemic Will Weigh on Earnings

 Adidas Warns That Worsening Pandemic Will Weigh on Earnings

HERZOGENAURACH, Germany — Adidas AG became one of the first consumer-goods companies in Europe to warn that renewed lockdowns will weigh on its earnings again and bring a swift end to a recent sales rebound.

The shoemaker’s revenue is no longer on track for growth in the fourth quarter, the German sportswear maker said, predicting a low- to mid-single-digit percentage decline. A small number of company stores have already closed in recent weeks amid a resurgence of coronavirus cases while stricter social distancing guidelines are slowing customer traffic in brick-and-mortar shops in Europe.

Adidas also said that its forecast could deteriorate if there are more major lockdowns in the weeks ahead. The stock fell as much as 2.8 percent Tuesday following a surge in markets Monday that boosted Adidas by 7.7 percent.

For now, Adidas is looking to control what it can amid the whipsawing swings of the pandemic. It’s focused on cutting costs, promoting e-commerce and shoring up its liquidity with a series of bond sales and a €1.5 billion ($1.8 billion) syndicated-loan facility through 2025. That allowed the company to replace a German government-backed package Adidas took on this spring.

Adidas’s forecast for fourth-quarter operating profit between €100 million and €200 million assumes that at least 90 percent of its stores remain open. With Covid-19 cases rising again in Europe and North America, that proportion has fallen to 93 percent recently, down from 96 percent at the end of September, the company said.

Looking ahead, investors want to hear Chief Executive Kasper Rorsted address whether he’s really going to sell the Reebok brand. Bloomberg News has reported that the company is conducting an internal review on the matter.

Sales returned to growth in Europe in the third quarter after a prolonged slump in the German sportswear maker’s home region. North America showed a slight sales decline and business in Asia slowed down even more.

Third-quarter operating profit reached €794 million ($939 million), exceeding the €717 million average analyst estimate.

The company managed to reduce inventories by €500 million in the quarter and the operating margin returned to a double-digit level as the shoemaker sold more products directly to consumers via e-commerce.

By Tim Loh.

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