Coronavirus could wipe out more than half of Adidas’s sales in China

Closed for business.
Closed for business.
Image: Reuters/Tingshu Wang
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Adidas expects Covid-19 to deal its business in China a serious blow to start the year.

The German sports company said today that while sales in mainland China, Taiwan, and Hong Kong were strong in the first three weeks of 2020, the outbreak of the new coronavirus has hit them hard after it closed a significant number of stores. Between Chinese New Year on Jan. 25 and the end of February, sales in greater China were down 80% versus the prior year. It now anticipates sales in the first quarter, which runs through March, will be down €800 million to €1 billion ($906.7 million to $1.1 billion) below their level last year in China, while profit will fall by as much as €500 million.

Adidas doesn’t break out its China sales separately but notes they make up about two-thirds of its Asia-Pacific business (pdf, p. 117). In the first quarter of 2019, sales in that region totaled €2.14 billion (pdf), meaning China would account for roughly €1.43 billion. Based on those figures, coronavirus will wipe out more than half Adidas’s China sales for the first quarter of 2020. We have reached out to Adidas for comment and will update this story with any reply.

On the brighter side, Adidas said since the end of February its stores and warehouses have been reopening and some shoppers have returned. Though it has faced some disruption in its supply chain, which like other companies counts on China for raw materials and manufacturing, none have been major, and it said most factories in the country are operating again.

Coronavirus’s impact on Adidas isn’t limited to China, however. As the virus has spread, it’s kept shoppers from spending in places such as Japan and South Korea too. Adidas is now anticipating sales in those countries to fall by roughly €100 million, according to Reuters, and for first-quarter sales of its entire business to decline more than 10%. The company said there’s still too much uncertainty for it to reliably quantify how big an effect the outbreak will have on its business in 2020. Its stock price was down more than 11% as of this writing.

The forecasts put a damper on what was otherwise an upbeat set of results from Adidas. In an interview with Bloomberg TV, CEO Kasper Rorsted called 2019 “the best year in the history of our company.” Sales for the year were roughly $26.6 billion, a boost of 6% over the prior year, excluding currency effects. The fourth quarter in particular saw strong results in key areas, such as Adidas’s e-commerce sales and its business in Europe, which is growing again after struggling at times over the past two years.

Rorsted pointed out the business is solid, and while the outbreak will hurt for a time, in the long-term Adidas will be fine, including in China. He did acknowledge that products such as activewear and sports equipment could take longer to bounce back. “If you’ve been sitting for two weeks in an apartment, your first thought is not to buy a pair of sneakers, it is to restore your fridge,” he told Bloomberg TV.