Adidas sales in China bounce back quicker than expected

Adidas’s sales in China rebounded quicker than expected after lockdown restrictions were lifted, nurturing hopes that the world’s second-largest sportswear maker can begin to overcome a collapse in global demand.

While the Nike rival warned investors in April that it would take several months until sales in China were back to last year’s level, it disclosed on Thursday that last month’s sales in the region were already higher than in 2019. “Overall revenue growth in Greater China turned positive for the month of May,” the company said in a statement.

“After the earlier-than-expected return to growth, Adidas now expects Greater China sales for the second quarter to be around the prior year-level,” it added.

Chief executive Kasper Rorsted previously warned investors that it will take several months for sales to return to pre-coronavirus levels as the recovery was “gradual rather than instant”.

Despite the encouragement from China, Adidas also repeated its earlier warning that group revenue in the current quarter would fall more than 40 per cent from a year earlier, twice the decline it reported for the first quarter. While two in three Adidas stores have reopened, many of them are still operating with reduced hours. 

China has turned into a bellwether for Adidas and the wider consumer goods’ sector’s ability to return back to normal after the lockdowns and an unprecedented drop in retail activity. During the peak of the lockdown in China, Adidas sales in China fell by some 80 per cent.

After five years of double-digit growth, China has become one of the single largest markets for Adidas, generating more than a fifth of overall sales in 2019.

Shares in the group plunged nearly 50 per cent between mid-January and April, but have since recouped more than half of the declines. As a response to the crisis, Adidas scrapped its dividend, ditched share buybacks and secured a state-backed syndicated loan of €3bn to bolster liquidity.

“We know that the consumer will come back,” Mr Rorsted said in March when presenting the company’s 2019 results.

After a public outcry in Germany, it backtracked from a controversial decision to defer rent payments for shops that were closed during the lockdown. 

While footfall in China last month was still lower than a year earlier, Adidas said that it boosted sales with “targeted efforts”, adding that the “traffic shortfall was more than offset by an increase in conversion rates and the exceptional growth in the company’s ecommerce business.” 

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