// Adidas warns on heavy Covid-19 impact on business in second quarter
// The retailer expects a 40% drop in sales
Adidas has warned that its second quarter sales and profits will be heavily impacted by the coronavirus lockdowns, after its first-quarter earnings were almost wiped out.
It expects a possible 40 per cent fall in second-quarter sales and a drop in second-quarter operating profit that could run into the hundreds of millions of euros.
The sportswear giant has already lost more than €1 billion (£860 million) of sales in April.
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At least 60 per cent of Adidas’ business is currently at a standstill, with more than 70 per cent of its stores closed worldwide.
Meanwhile online sales, which last year represented 13 per cent of the total, are growing fast, particularly in China.
However, the growth is not enough to offset the loss of in-store sales.
Adidas chief executive Kasper Rorsted said he only expects a full recovery by the end of the second quarter.
Speaking on when shops open, he said: “We’re not going to see an imminent return to what we had before.
“We are taking all the learnings from China and building that into a recovery for the rest.”
Adidas, which was forced to suspend dividend payments as a condition for a government-backed loan earlier this month to get it through the crisis as it burns cash, said it would replace that loan with other financial options as soon as possible.
The retailer has partially cancelled orders with suppliers for the second and third quarter after inventories jumped by more than a third in the first quarter to €4.33 billion (£3.72 billion).
Adidas said it had taken a hit of around €250 million (£215 million) on unsold stock it took back from retailers in greater China, purchase order cancellations and higher bad debt provisions.
It would not provide an outlook for 2020 given the uncertainty over when stores might reopen.