- Prachi Singh |
In the fourth quarter, Adidas recorded sales growth of 1 percent on a currency-neutral, while sales were down 5 percent to 5.548 billion euros in euro terms. The company witnessed e-commerce growth of 43 percent. The company added that strong sell-through of the company’s products is also reflected in the growth of 14 percent in its direct-to-consumer business during the quarter.
Commenting on the company’s performance, Adidas CEO Kasper Rorsted said: “Our business continued to recover towards year-end and we returned to growth in the fourth quarter. E-com was a standout throughout the year as we grew revenues in our most important store by 53 percent in 2020 to significantly more than 4 billion euros. We are confident about 2021 and will be fast out of the gate in the first year of our new strategic cycle, delivering mid to high-teens sales growth globally.”
Adidas witnesses growth in all markets except for Europe
The company said, on a currency-neutral basis, all markets except Europe posted sales increases in the fourth quarter. Asia-Pacific grew 1 percent, driven by a strong recovery in Greater China, where sales were up 7 percent. With an increase of 2 percent, sales in North America were also up compared to the prior year, driven by an improvement of 4 percent for the Adidas brand.
Revenues in Europe were impacted by renewed lockdowns, with about half of the company’s stores closed at the end of the year. In addition, the market faced a tough comparison base due to the launch of products related to the UEFA European Football Championship, which had resulted in 14 percent sales growth in the prior year quarter. As a result, revenues in Europe declined 6 percent in Q4.
The company further said that sales in both Latin America and emerging markets grew 7 percent, while Russia/CIS recorded an increase of 21 percent.
In the fourth quarter, the gross margin declined 0.3 percentage points to 48.7 percent.
Review of Adidas full year results
Adidas added that the sales development during the year 2020 was significantly impacted by the negative effects following the global outbreak of the coronavirus pandemic. Full-year revenues decreased 14 percent in currency-neutral terms, while in euro terms, revenues decreased 16 percent to 19.844 billion euros. However the company saw e-commerce deliver 53 percent growth in currency-neutral terms in 2020, reaching more than 4 billion euros in revenues and accounting for more than 20 percent of total sales. Led by e-commerce, currency-neutral revenues in the company’s direct-to-consumer business increased by 7 percent for the full year.
For the full-year, currency-neutral sales decreased 17 percent in Asia-Pacific and 15 percent in Greater China. Overall, currency-neutral sales declined 9 percent in North America and 12 percent in Europe in 2020. Currency-neutral sales were down at double-digit rates or 16 percent in Latin America and by 18 percent in the Emerging Markets remaining flat in Russia/CIS.
The company’s gross margin decreased 2.3 percentage points to 49.7 percent in 2020, while net income from continuing operations decreased to 429 million euros and basic EPS from continuing operations declined to 2.15 euros compared to 9.70 euros in 2019.
Adidas expects sales recovery in 2021
With the company’s global store opening rate currently standing at above 95 percent, the company said that Adidas expects a strong top-line recovery in 2021. Sales are expected to increase at a mid to high-teens rate on a currency-neutral basis. Revenues are anticipated to increase in all market segments with Greater China, Asia-Pacific and Latin America all projected to grow currency-neutral net sales in a range of between 20 percent and 30 percent. EMEA is expected to record growth in the mid to high-teens, while North America is forecast to expand revenues at a high-single-digit rate.
The company’s gross margin is expected to almost fully recover and reach a level of around 52 percent in 2021. Despite a significant increase in marketing activities and related investments, operating expenses are expected to grow at a materially lower rate than revenues due to effective cost management. As a result, the company’s operating margin is projected to rebound sharply to a level of between 9 percent and 10 percent. Net income from continuing operations is projected to increase to a level of between 1.25 billion euros and 1.45 billion euros.
The Adidas executive board and supervisory board have decided to resume the company’s dividend payments and will propose paying a dividend of 3 euros per dividend-entitled share for the financial year 2020 to Adidas shareholders at the annual general meeting on May 12, 2021.
Image: Adidas media centre