Adidas, Puma warn of virus blows to 2020 business

Adidas, Puma warn of virus blows to 2020 business

March 11, 2020 0 By mykenyancareers
addidas image - Adidas, Puma warn of virus blows to 2020 business
Adidas said its revenues in key market China would come in between 800 million and one billion euros ($907 million-1.1 billion), lower than the 2019 January-March period/COURTESY

FRANKFURT AM MAIN, Germany, Mar 11 – German sportswear makers
Adidas and Puma on Wednesday warned the coronavirus outbreak would deal painful
blows to their business in 2020, weighing especially on the first quarter with
store closures and lower sales.

Adidas said its revenues in key market China would come in between
800 million and one billion euros ($907 million-1.1 billion), lower than the
2019 January-March period.

Sales in China plunged by 80 percent in late January-early
February.

“Following the outbreak of the coronavirus, our business in
Greater China has experienced a significant negative impact since Chinese New
Year,” chief executive Kasper Rorsted said.

Meanwhile Puma said it “cannot quantify the negative
effect” but pointed to sales “severely affected” in China and
other Asian countries, adding there was also “significantly lower”
traffic to its stores in Europe as the virus spreads.

The historic rivals both faced disruption to their supply chains,
although the gradual reopening of factories in China and sourcing from other
countries has so far limited the impact.

Nevertheless, “we cannot yet reliably quantify the magnitude
of the overall financial impact in 2020,” Adidas CEO Rorsted said.

Shares in Adidas fell on the news, plunging 8.1 percent to trade
at 203.15 euros around 1:00 pm (1200 GMT) in Frankfurt and trailing the DAX
blue-chip index which was up 0.8 percent.

Looking ahead, “the further recovery in Greater China, the
extent of spillover into other countries as well as the availability of raw
materials remain largely uncertain,” Rorsted added.

Adidas finance director Harm Ohlmeyer said the group expected a
sales impact of between 50 and 70 million euros if this year’s major sporting
events, the Euro 2020 football tournament and the Summer Olympics in Japan, are
cancelled.

Rorsted said the likely effect would be “marginal”,
while he expected people to continue to exercise at home and shop online even
under pandemic conditions.

Without the effects of the coronavirus outbreak, Adidas had
forecast sales growth of six to eight percent and “double-digit-rate
improvement of the bottom line” in 2020.

It reported Wednesday sales of 23.6 billion euros in 2019, up
almost eight percent, for a net profit up 16.1 percent at almost two billion
euros.

Adidas added that it had “performed strongly” in the first
three weeks of 2020, before the coronavirus began to make itself felt.

In China, one of its most important markets, Adidas owns 500
stores and boasts a network of around 11,500 franchises.