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Adidas and Puma see direct-to-consumer growth, especially online

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Adidas and Puma see direct-to-consumer grow, especially online

Adidas and Puma this week reported on a growing proportion of sales made direct to consumers, and especially online. Adidas also said sales were sharply down in its Chinese market following the outbreak of the Covid-19 coronavirus

 

Third of Adidas sales now from ecommerce

Adidas now makes a third of its sales direct to the consumer, the brand said as it reported a lift in full-year sales and profits.

 

That includes ecommerce, which grew by 34% to almost €3bn during 2019, while direct-to-consumer revenues, across channels including its stores, were up by 18% overall. Overall revenues – across all channels – grew by 8% to €23.6bn, or 6% on a currency neutral basis. Growth came primarily online and through expansion of its greater China business, where sales grew by 18%. Sales also grew across Asia-Pacific (+13%), North America (+10%), Latin America (+22%), Europe (+14%) and emerging markets (+13%) as well as Russia/CIS (+6%).

 

Net income from continuing operations grew by 12% to $1.9bn, after shifting to new IFRS accounting standards. Gross margins declined by 3.2 percentage points. “Negative currency effects and a less favourable pricing mix more than offset positive effects from lower sourcing costs as well as a better product and channel mix,” the brand said in its full-year statement.

 

Looking ahead, the Germany-based sports and athleisure brand, ranked Top250 in RXUK Top500 research, now predicts that currency-neutral sales will grow by up to 8% in 2020, while net income will increase by up to 13%. However, the forecast, in results published this week, does not yet reflect the impact of the coronavirus outbreak, which started in China but has since spread to Europe and the US - and Adidas says that forecast will be liable to change.

 

Adidas chief executive Kasper Rorsted said: “In 2019 we proved our resilience and delivered a strong year yet again. We recorded revenue increases across all regions and our direct-to-consumer business grew double-digits driven by ecommerce, one of our strategic growth areas.

 

“In 2020, we will stay focused on the execution of our strategy to bring ‘Creating the New’ home and aim for a sixth consecutive year of double-digit bottom-line growth. Following the outbreak of the coronavirus, our business in Greater China has experienced a significant negative impact since Chinese New Year. As the situation keeps evolving, we cannot yet reliably quantify the magnitude of the overall financial impact in 2020. Regardless of the impact on our business, it remains our top priority to ensure the health and safety of our employees and their families.”

 

Coronavirus update

Adidas says its business in Greater China performed strongly in the first three weeks of 2020 but since then it has experienced “a material negative impact on its operations” following the coronavirus outbreak. Footfall has been down while “a significant” number of directly-operated and third-party shops closed. Revenues in the Greater China business were about 80% down on the previous year in the period between January 25 and the end of February.

 

“Since then, the company has started to experience a slight improvement in its Greater China business activity, with stores and warehouses gradually opening and consumer traffic slowly picking up,” it said in its full-year statement. “Since the coronavirus outbreak, adidas has been working closely together with its wholesale partners to ensure inventory levels remain healthy in the market. This resulted in the cancellation of all shipments in February and could lead to the acceptance of a significant amount of product takebacks, which the company plans to clear through its own channels throughout the remainder of the year.”

 

It said that both the situation around coronavirus as it spilled over into other countries, and the availability of raw materials remained “largely uncertain”. It added: “In the light of these uncertainties the overall impact of the coronavirus outbreak on the company’s business in 2020 cannot be qualified reliably at this point in time. Despite the temporary challenges posed by the coronavirus outbreak, the company remains fully confident about its future growth prospects thanks to its healthy fundamentals and its strong positioning within an attractive industry.”

 

Puma grows direct sales, especially online

Direct-to-consumer retail sales grew fast at Puma. Retail grew by 22% to €1.4bn during the year, accounting for 25.4% of all its sales, up from 24.3% the previous year. These sales came both as the retailer grew like-for-like sales via its full price, factory and online channels, and as it opened more shops, including a new flagship store on New York’s Fifth Avenue. “Our own retail businesses ensure regional availability of Puma products and the presentation of the Puma brand in an environment suitable to our brand positioning, said Puma in its full-year statement.

 

Puma, ranked Top350 in RXUK Top500 research, said its ecommerce business “continued to record far above-average growth in 2019. “This was brought about by, for example, the expansion of the product range in online stores worldwide and by our targeted sales promotions in the online business,” it said. “In addition, our ecommerce activities on special days in the online business, such as Singles’ Day in China, the world’s biggest online shopping day, the so-called Black Friday and Cyber Monday, turned out to be particularly successful.”

 

Puma’s total sales, including more than £4bn from wholesale, passed the €5bn mark in its 2019 full-year for the first time in its history, while profitability improved, with earnings before interest and tax beating expectations to rise by 30.5% to €440.2m.

 

Puma had a successful year on the football field and the athletics track as it did deals with sporting partners from Manchester City to Valencia CF and the Italian women’s football team as it reached the quarter finals of the Women’s World Cup. Sporting highlights included sponsoring 115 athletes and 12 national federations taking part in the World Athletics Championships in Doha.

 

Off the pitch it topped out a new multichannel distribution centre in Geiselwind, Germany, expected to go into operations in early 2021, and is set to open a North American distribution hub outside Indianapolis later this year.

 

Image courtesy of Adidas

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