Adidas’ China Sales Pick Up but Outlook Remains Grim
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German sportswear giant Adidas revealed a return to positive revenue growth in Greater China in May. Stores there have been opening up gradually since mid-April but the gains are still earlier than expected.
The company said all of its stores in mainland China were open again and that while store traffic was still down, those who were coming in were enthusiastic shoppers.
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That may see Chinese business return to the previous year’s levels faster than expected, Adidas said, possibly even within this quarter.
Online retail also continued to show “exceptional growth,” the brand’s statement boasted on Thursday. In the first quarter, e-commerce had already increased by 35 percent and had been continuing to rise dramatically. In March alone, it grew 55 percent, currency neutral. The company’s previously stated goal was to make around 4 billion euros in online sales by the end of this year and, given ongoing lockdown conditions and the resulting e-commerce acceleration in some regions, it may well achieve this.
Despite the positive results in China, Adidas concluded by saying that the company wouldn’t be changing its guidance for the second quarter — due to business uncertainty caused by the coronavirus pandemic, company executives had already said they could only make predictions three months ahead. In April, their guidance had been for a 40 percent drop in sales during the second quarter. “Adidas does not project a significant deviation” from earlier guidance, the statement said.
This is likely because, although three-quarters of the brand’s retail spaces worldwide are open or partially open, Adidas’ biggest markets are still operating under some form of lockdown. Europe remains Adidas’ largest territory, with sales totaling 6.07 billion euros in 2019. A quarter of the group’s stores there remain closed, with others operating on limited hours. In North America, another significant market that made the company 5.31 billion euros last year, around half of Adidas’ stores remain closed. The group closed many of its stores during the protests in the U.S. over the killing of George Floyd in Minneapolis.
Researchers at Commerzbank pointed out that business in China, which includes Hong Kong, usually makes up more than 20 percent of Adidas’ total revenues and about two-thirds of its Asia Pacific revenues — that would have been more than 5 billion euros in 2019.
Adidas shares rose slightly on the news and most market analysts took the statement as a positive sign. It was also an indication they had been correct about ongoing demand for sportswear. “Sporting goods looks to be better off than many other sub-sectors,” researchers at HSBC reported earlier this month. This is because consumers are more focused on staying healthy during the pandemic and purchases are made locally, not while traveling, the analysts noted.
