Virus slashes Adidas profits by 95% in 1Q

Results for 1Q speak to the serious challenges that the global outbreak of the coronavirus poses even for healthy companies, says CEO


FRANKFURT • German sportswear maker Adidas AG yesterday reported first-quarter (1Q) profits slashed by 95%, blaming the collapse in sales inflicted by the coronavirus pandemic.

Net profits fell to €31 million (RM146.5 million), down from €632 million in January-March 2019 and a fraction of forecasts from analysts surveyed by FactSet Research Systems Inc.

“Our results for 1Q speak to the serious challenges that the global outbreak of the coronavirus poses even for healthy companies,” CEO Kasper Rorsted said in a statement.

As the virus spread across the world, the group was forced to close stores beginning in vital growth market China.

Even as sales there have begun to rebound, closures across much of the rest of the world — amounting to more than 70% of Adidas’ total network — mean the group “is still not able to provide an outlook for the full-year 2020”.

“Both top and bottom-line declines in 2Q of 2020 are currently expected to be more pronounced than those recorded in 1Q,” Adidas said, forecasting a slump in currency-adjusted sales of “more than 40%” and an operating loss.

After its cash reserves shrank by more than €500 million in 1Q, Adi- das in April secured an emergency €2.4-billion loan from public investment bank KfW Group and €600 million from private banks.

The group was at the centre of a brief storm of outrage in home country Germany after it said it would halt rent payments for its stores during the coronavirus shutdowns.

Faced with public outcry, Adidas backtracked on the policy soon afterwards.

Meanwhile, German chemicals and pharmaceuticals giant Bayer AG yesterday reported surging 1Q profits, as its consumer health arm saw a “substantial increase in demand due to the Covid-19 pandemic”.

Net profits across the whole group added 20% year-on-year to reach €1.5 billion, Bayer said in a statement, on adjusted revenues up 6% at €12.8 billion.

The consumer health division with household-name products like Aspirin saw a 13.5% increase in sales, far outstripping growth at the pharmaceuticals and agriculture units.

But despite the higher demand, “restrictions related to the pandemic are adversely impacting parts of the company’s business”, Bayer said.

The group “has implemented extensive measures at its sites in a bid to halt or at least slow the spread” of the virus.

“It will not be possible to reliably assess the positive and negative effects” of the coronavirus on Bayer’s business activity “until later in the year”, the group said, shying away from any update to 2020 financial forecasts.

Legal entanglements from Bayer’s 2018 takeover of US seeds and pesticides maker Monsanto Co grew in 1Q.