German sportswear manufacturer Adidas records profit again in Q3

Following losses in the second quarter, operating profit of Adidas improved by more than 1.1 billion euros and reached 794 million euros (937 million U.S. dollars) in the third quarter, the German sportswear manufacturer announced on Tuesday.
However, net income from continuing operations of Adidas was still down 10.4 percent year-on-year at 578 million euros in third quarter (Q3) of the fiscal year, according to the company. “We saw a strong recovery in our business in Q3,” said Adidas chief executive officer (CEO) Kasper Rorsted, adding that “our focus on healthy inventories, profitable sell-through and disciplined sell-in clearly paid off.”

Adidas recorded a “strong sequential revenue improvement” as more than 90 percent of its retail stores were open again, most of which had been closed for several weeks in the second quarter due to the COVID-19 crisis and related restrictions. Although most shops around the world continued to be open, Adidas saw “exceptional growth” in its e-commerce segment with year-on-year sales increasing 51 percent at currency-neutral rate.

“During the third quarter, all market segments showed a sequential recovery compared with the second quarter,” the company noted. In Russia and Europe currency-neutral sales “even returned to growth.” In the United States, sales in Q3 declined slightly despite positive sales growth during the first two months of the quarter due to a temporary support of consumer spending by government purchase incentives, according to Adidas. Sales in the Asia-Pacific region declined by 7 percent while sales in China decreased by 5 percent “after initial pent-up demand faded.”

The company’s direct-to-consumer business in China already grew by more than 30 percent in Q3 and Adidas is expecting its overall business in China to return to growth in Q4. However, Adidas warned that the COVID-19 pandemic recently worsened in several major markets, causing shop closures again. In addition, stricter distance regulations, particularly in Europe, reduced the number of customers in stores, Adidas noted. Despite a strong comparison base from the previous year, Adidas expects sales in the fourth quarter to grow in the low- to mid-single-digit range. In Q4 last year, sales had been boosted by the launch of UEFA Euro 2020 and the Chinese New Year.