Earnings

Adidas says first-quarter profits fell more than 90% due to coronavirus store closures

Key Points
  • Adidas saw its Q1 net income drop more than 90%, with about three-quarters of its stores worldwide closed as a result of the Covid-19 pandemic.
  • CEO Kasper Rorsted told CNBC the first two months of the quarter were normal, "and then we saw dramatic, basically falling off the cliff in mid-March."
  • Adidas reported a 19% decline in first-quarter net sales and predicted sales will fall by 40% in the second quarter.
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Adidas CEO Kasper Rorsted: 70% of our stores closed down

Adidas predicted that sales will fall by 40% in the second quarter after the German sportswear giant saw profits drop more than 90% in the first three months of the year due to coronavirus-driven store closures.

"The first two months of the quarter ... everything was really normal. And then we saw dramatic basically falling off the cliff in mid-March," CEO Kasper Rorsted said in an interview that ran on CNBC's "Squawk on the Street."

The company on Monday reported a 19% decline in net sales for the first quarter from the previous year to 4.75 billion euros ($5.16 billion), as 70% of its stores worldwide closed as a result of the Covid-19 pandemic.

Its first-quarter net income was 26 million euros, down 96% from a year earlier. Adidas said that owing to uncertainty over the duration of store closures, it would be unable to offer a full-year outlook.

E-commerce — which it described as "the only channel that has remained fully operational in most parts of the world" — rose 35% but failed to offset the loss from pandemic-induced lockdowns around the world.

Looking ahead to the second quarter, the company said it expects "both top- and bottom-line declines in the second quarter of 2020 are currently expected to be more pronounced than those recorded in the first quarter." It forecast sales to come in more than 40% below last year's.

Rorsted told CNBC's "Squawk Box Europe" earlier Monday that despite the current situation, the sporting goods industry would emerge favorably over the medium term due to increased focus on health and fitness around the world.

"The personal exercise, as soon as people are allowed to go outside, I think that will grow very quickly because having spent six, eight, 10 weeks inside. I think that desire to go out and move is going to be quite outspoken," he said.

Rorsted also suggested that the business's recent performance in China gives a hint about what emerging from the crisis may eventually look like elsewhere in the world.

"What we have seen in China in March is growth in our own retail stores, a very strong growth in our e-commerce — we grew 35% for the quarter, we grew 55% globally for e-commerce in the month of March, and we grew even quicker in China — and we are seeing that trend in China continuing in the month of April," he said.

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Adidas CEO: Don't think we could have done anything differently to offset lockdowns