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53% growth in online lifts Adidas, but sales down 14%

Adidas' brand flagship in Shanghai. Image courtesy of Adidas

Ecommerce sales growth of 53% to more than €4bn, with a 14% increase in D2C ecommerce of 43% in Q4 has helped lift the world’s largest sports brand to a strong finish to 2020.

Despite a this, like most brands and retailers sales over the whole year were markedly down on 2019. For the full year, Adidas recorded £367.46m of net income from continuing operations, compared to a sharply higher £1.64bn in the previous year.

The Herzogenaurach-based company generated £17bn of annual sales, which translates to a 14% year over year decline.

On a currency-neutral basis, all markets except Europe posted sales increases in the fourth quarter. Asia-Pacific grew 1%, driven by a strong recovery in Greater China, where sales were up 7%. With an increase of 2%, sales in North America were also up compared to the prior year, driven by an improvement of 4% for the adidas brand.

Revenues in Europe were impacted by renewed lockdowns, with about half of the company’s stores closed at the end of the year. In addition, the market faced a tough comparison base due to the launch of products related to the UEFA European Football Championship, which had resulted in 14% sales growth in the prior year quarter.

As a result, revenues in Europe declined 6% in Q4. Sales in both Latin America and Emerging markets grew 7%, while Russia/CIS even recorded an increase of 21%.

“2020 was a year like no other. But despite all the challenges we faced, we still used the year to make adidas a better company. This is the result of a great team effort by all of our more than 60,000 employees. I am more than thankful for their enduring support and great commitment,” says Adidas CEO Kasper Rorsted. “Our business continued to recover towards year-end and we returned to growth in the fourth quarter. E-com was a standout throughout the year as we grew revenues in our most important store by 53% in 2020 to significantly more than € 4 billion. We are confident about 2021 and will be fast out of the gate in the first year of our new strategic cycle, delivering mid- to high-teens sales growth globally.”

The year ahead

With the company’s global store opening rate currently standing at above 95%, Adidas expects a strong top-line recovery in 2021. Sales are expected to increase at a mid- to high-teens rate on a currency-neutral basis.

Revenues are anticipated to increase in all market segments with Greater China, Asia-Pacific and Latin America all projected to grow currency-neutral net sales in a range of between 20% and 30%. EMEA is expected to record growth in the mid- to high- teens, while North America is forecast to expand revenues at a high-single-digit rate.

The company’s gross margin is expected to almost fully recover and reach a level of around 52% in 2021. Despite a significant increase in marketing activities and related investments, operating expenses are expected to grow at a materially lower rate than revenues due to effective cost management.

As a result, the company’s operating margin is projected to rebound sharply to a level of between 9% and 10%. Net income from continuing operations is projected to increase to a level of between €1.25bn and €1.45bn.

Adidas is also set to divest the Reebok brand.

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