In The First Quarter, Adidas'S Inventory Was Over 1/3.

On Monday, German sports giant Adidas (Adidas) released its key financial data for the first quarter, operating profit fell 93% compared to the same period last year, and sales fell 19% year-on-year, lower than expected. Adidas warned that revenues in the second quarter would be more impacted, sales could drop by 40% compared to the same period last year, and operating profits may be negative.

In the first two months of this year, sales in the Asia Pacific region increased by 8% over the first two months of this year, but the negative effects of factory closures offset this growth. At present, the business of Adidas 60% is in a state of stagnation, and over 70% of the world's stores are temporarily closed. It was also postponed or cancelled by major sports events including the Tokyo Olympic Games and the European Football Championship.

In the first quarter, Adidas's inventory was over 1/3, worth 4 billion 330 million euros. Adidas has partially cancelled supplier orders in the second and third quarter. The company plans to restock some of its unsold stocks for sale in 2021, including classic Superstar and Stan Smith sneakers. The rest of the inventory will be discounted through partners, Adidas websites and direct sales outlets. Harm Ohlmeyer, chief financial officer of Adidas, said: "we expect that the whole industry will be on a large scale promotion in the second half of the year."

Bets on China's recovery and online business

Adidas chief executive Kasper Rorsted said in a statement that it will double betting on China's recovery and opportunities seen in e-commerce channels.

E-commerce business partially offset the impact of store closes. According to the constant exchange rate, e-commerce sales in the first quarter of Adidas increased by 35% over the same period. Among them, e-commerce sales in March increased by 55% over the same period last year. Kasper Rorsted said China's online business has more than doubled in the first few weeks of April, and he expects e-commerce revenues in 2020 to reach 4 billion euros, more than 3 billion euros in 2019.

Another highlight of Kasper Rorsted is that because of the growing enthusiasm for fitness, many people are exercising at home, and sales of yoga mats have set a record.

As a result, Adidas has tilted its staff, inventory and marketing work to the online business and launched a special event to provide free three months' fitness app senior membership for users in many countries and regions around the world.

In the first three weeks of April, as China's stores reopened, sales of Adidas in China began to recover. But Kasper Rorsted told reporters: "they (Chinese consumers) do not buy as much as they did before the epidemic. The situation will not return immediately to the same as before. We are drawing lessons from the Chinese market and turning it into a way to help other markets recover. " He expects that the Chinese market will not fully recover until the end of the second quarter.

Kasper Rorsted also expects stores in North America to reopen in mid May, and hopes that most stores around the world will be back to business before the end of June.

Adidas warned that in the second quarter, sales will decline by 40% based on constant exchange rates, and operating profits may be negative. Kasper Rorsted said that in April, Adidas had lost more than 1 billion euros in sales.

In view of the fact that the closed store did not know when to reopen, Adidas did not provide this year's annual performance expectations.

Adidas said the cash loss of the company in the first quarter was 1 billion 400 million euros, and the cash balance of the company as at March 31st was 1 billion 975 million euros, which highlighted its need for government loan assistance. Adidas received 3 billion euros of government loan assistance in April 14th. As a condition of loan, Adidas will suspend dividends.

Since the outbreak of the new crown, Adidas shares have fallen by more than 1/3, closing at 206.8 euros per share on Monday.

The key financial data for Adidas as of the first quarter of fiscal year 2020 were as follows: March 31st:

According to the constant exchange rate, sales fell by 19% to 4 billion 753 million euros, below the 4 billion 850 million euros expected by analysts.

Operating profit fell 93% to 65 million euros, far below analysts' expectations of 263 million euros. Among them, Greater China inventory backlog, cancellation of orders and provision for bad debts increased, resulting in an operating profit of about 250 million euros.

Operating margin fell to 1.4%

Net income from continuing operations fell 97% to 20 million euros.

By brand

Adidas: sales fell 20% year-on-year

Reebok: sales fell 12% year-on-year

By Region

Asia Pacific region: sales fell 45% year-on-year, with sales in Greater China falling by 800 million euros (58%).

Europe: sales fell 8% year-on-year

Latin America: sales are basically flat.

North America: sales grew 1% year-on-year

Russia: sales grew 9% year-on-year

Emerging markets: sales fell 11% year-on-year