Adidas e-commerce boom helps out as store traffic picks up

Adidas AG’s sales are bouncing back more rapidly than expected after global store closures, with a surge in e-commerce helping the German sportswear company ride out Covid-19 lockdowns.

Adidas said it expects to turn an operating profit in the third quarter of between 600 million euros and 700 million euros -- another improvement after a loss of 333 million euros by that metric in the second quarter. (Bloomberg)

Overall sales were better than analysts expected in the latest three months and the company said its store operations are starting to return to normal. Third-quarter revenue is still expected to fall by a mid to high single-digit percentage from a year earlier, but that's better than the 34% collapse in the second quarter.

The shares rose 1.3% early Thursday in Frankfurt, limiting this year's decline to 16%.

After closing 70% of its stores globally because of the pandemic, Adidas is grappling with the new normal between online shopping and physical retail as it seeks to rekindle growth. With more than nine out of 10 stores open again globally, fewer customers are coming in but a higher percentage are buying.

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

The company said there's still too much uncertainty about the pandemic, the pace of shopping in re-opened stores and the global economy to offer a full-year forecast. While China is seeing double-digit growth again -- in part thanks to lifting lockdowns as early as March -- North America and Latin America are still suffering from disruptions as the coronavirus rages.

Other Challenges

Adidas has other challenges, too. After cutting costs and benefiting from strong demand for retro footwear, Rorsted needs to tap his creative side as Adidas prepares to unveil a new strategy cycle heading into 2021.

And while Rorsted just agreed to a five-year contract extension, he's under growing pressure to create more opportunities for minorities and women. Adidas's human resources chief recently resigned after complaints from Black employees about her handling of diversity issues.

Second-quarter sales of 3.58 billion euros ($4.25 billion) were above analysts' estimate of 3.24 billion euros. E-commerce almost doubled in the period.

Adidas said it expects to turn an operating profit in the third quarter of between 600 million euros and 700 million euros -- another improvement after a loss of 333 million euros by that metric in the second quarter.