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Adidas sales and profits grow strongly as customers turn online to buy direct

Image courtesy of Adidas

Image courtesy of Adidas

Shoppers turned online to buy direct from Adidas in the first three months of the year, helping to lift sales by a fifth and turbocharge profit growth.

The brand, ranked Leading in RXUK Top500 research, said “exceptional” growth both online and in the greater China market helped to boost its profitability. Direct to consumer sales grew by more than 30%, with online sales 43% ahead of last time. That builds on growth of a year earlier, when ecommerce sales grew by 35%, year-on-year.

Adidas says shoppers bought its footwear (+31%), as well as training, running, outdoor and lifestyle clothing – and tended to pay full price more often than they had a year earlier, when the pandemic inspired discounting. The online growth came as many of its shops were closed during lockdowns. Fewer than half of its European shops were open in March; however by the end of the quarter, 89% of its shops around the world were open. 

“We are fast out of the gate in the first year of our new strategic cycle with excellent revenue growth, DTC [direct-to-consumer]–led sales increases in all market segments and strong profitability improvements,” says Adidas chief executive Kasper Rorsted. “We upgrade our full-year outlook as we are now even more confident about a strong top-line recovery this year, even though the environment is not yet back to normal.”

Adidas net sales reached €5.3bn (£4.6bn) in the first quarter of the year, to March 31. That’s 20.2% up on the same time last year. Pre-tax income of €669m (£580.9m) was 5,179.8% up on the same time last year, while net income from continuing operations – the business is selling the Reebok brand – grew by 1,839.9% from €26m (£22m) to €502m (£435.9m).

Sales grew fastest in its emerging greater China area, rising by 151.1% to €1.4bn (£1.2bn). Growth was steadier in its more mature EMEA (+3.8% to €1.8bn/£1.6bn) market, while sales in North America (-0.8% to €1.2bn/£1bn) fell back slightly, as a result of currency fluctuations. 

Profitability increased as investment focused on digital marketing, with in-store and offline marketing “restrained” by the effects of Covid. Added to that, the cost of sourcing goods was lower than last year – when orders with suppliers were cancelled at the outbreak of Covid-19. 

Looking ahead

Looking ahead, Adidas now expects net income from continuing operations to reach between €1.25bn (£1.1bn) and €1.45bn (£1.26bn) in its current financial year year, up from €461m (£400m) in the previous year, as demand for its products continues to be stronger than it had expected. In the second quarter of the year, it expects to see sales grow by about 50%, as it releases new products including the Ultraboost, created as a circular design product that is “made to be remade” and as major sporting events take place. 

Rorsted says: “Although external uncertainties remain elevated, 2021 will be a successful year for Adidas. Our inventories are clean and our pipeline is well-filled with innovative products, which are resonating well globally. The return of major sport events gives us the opportunity to showcase our brand in front of billions of consumers and we look forward to welcoming them back at our stores in all part s of the world. As a result, our revenues will grow even faster than expected this year, driven by strong sales increases in all markets. Overall, we are very confident about achieving our top and bottom-line ambitions in 2021 and beyond.”

Commenting on the figures, Pippa Stephens, retail analyst at data and analytics business GlobalData, says: “Amid Adidas’ push to grow its direct-to-consumer (DTC) operations, currency-neutral revenue via this channel rose by 31%, driven by online, which increased by a further 43%, despite having also recorded growth of 35% in Q1 FY2020. With DTC now accounting for over one-third of Adidas’ total sales, not only has it helped the business to better mitigate the negative impacts of temporary store closures during COVID-19, but it will have also given Adidas greater control over its fulfilment and supply chain, making the shopping journey more enjoyable for customers.

“Following Adidas’ divestiture of Reebok, which was launched at auction earlier this week, it will now be able to place even greater focus on its eponymous brand, with more streamlined investments in its DTC channels needed to further boost brand awareness and accessibility.”

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