Adidas AG said its first-quarter net profit dropped 95% as sales tumbled and it warned of an even bigger hit in the second quarter of the year.
The sportswear maker said more than 70% of its stores world-wide remained closed, leading it to predict second-quarter sales, stripped of currency swings, to be more than 40% below the prior year level.
Sales in the first quarter dropped 19% to €4.75 billion ($5.14 billion) as even 35% growth in online sales couldn’t offset the declines in physical sales due to the extensive store closings in Greater China, Korea and Japan and then Europe and much of the rest of the world. Net profit fell to €31 million from €632 million a year earlier.
“Our results for the first quarter speak to the serious challenges that the global outbreak of the coronavirus poses even for healthy companies,” said Adidas CEO Kasper Rorsted.
Mr. Rorsted said the company was now focused on doubling down on the recovery in China, where sales dropped 58% in the quarter and the company faced millions in product takebacks. That ate into its gross margin, which fell to 49.3% from 53.6% a year ago. Adidas said sales have been recovering in Greater China and continued to recover there in the first three weeks of April.
At the same time, Adidas is focusing on opportunities in e-commerce, where revenues accelerated growth in March, growing globally at 55%.
Adidas said it couldn’t yet provide a full-year guidance as it remains uncertain how long lockdowns will last and how quickly demand normalizes after stores reopen. But Mr. Rorsted said he was confident about Adidas’ long-term prospects as consumers wanted to stay fit and healthy through sports.