Adidas Reports 27% Growth in Q1, Raises Outlook

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Adidas is fighting its way back to pre-pandemic levels, reporting first-quarter revenues grew 27 percent to 5.27 billion euros.

In 2019, the last “normal” year for shoppers, the German activewear giant brought in 5.9 billion euros over the same quarter. Adidas expects sales in the second quarter to take the company back to where it was before the health crisis.

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“We are now even more confident about a strong topline recovery this year, even though the environment is not yet back to normal,” Kasper Rorsted, chief executive officer of Adidas, said in a statement.

The second quarter has started well, the executive told journalists at a press conference revealing the results. “We expect significant sequential acceleration, with global sales predicted to increase 50 percent in Q2,” Rorsted said. “This will get us just back to 2019 levels, despite continued headwinds.”

Adidas’ results were slightly higher than consensus estimates and the company adjusted its outlook upward for the full year, predicting growth in the high mid-teens by the end of 2021.

The company has benefitted from lockdown trends for comfortable sportswear at home but Adidas also believes it is well placed to take advantage of what it predicts will be an ongoing movement toward more casual clothes.

“I think it’s going to be very difficult to persuade people who have been sitting at home in flip-flops and a tracksuit to get back into brown shoes and a normal suit,” Rorsted argued. “I think you’re going to see an acceleration of casual wear at the office. It might not be jandals but it’s definitely not going to be brown shoes and a tie. And that’s where we actually believe there is a big, long-term opportunity.”

Any post-lockdown decreases in demand for tracksuit pants or the sought after Adilette Slide shoes would be more than compensated for by both this casual trend and the ongoing popularity of sports like running, Rorsted suggested.

Over the first quarter, direct-to-consumer made up almost a third of all Adidas sales and, of that, e-commerce almost doubled over the past two years, the company stated. E-commerce grew 43 percent over the first quarter compared to 2020.

Last year, e-commerce retail brought in almost 4.5 billion euros in sales, Rorsted said, and the business was now focused on improving delivery and logistics.

Adidas saw the most growth in Greater China with sales there rising 155.9 percent, currency neutral, to hit 1.4 billion euros. This growth was in comparison to the first quarter of 2020 when most of China was under a strict lockdown. The rest of Asia-Pacific grew 3.9 percent to 603 million euros.

The tensions that arose around the sourcing of Chinese cotton, which saw calls by Chinese consumers to boycott brands like Adidas, Nike and H&M, did have an impact on sales there in the first quarter, Rorsted confirmed. “On China, it’s too early to tell what Q2 will look like,” he said. “What we can tell you is that following a significant drop in traffic in both physical and digital channels at the end of March we have experienced a slow but steady recovery throughout the past couple of weeks and we expect this trend to continue.”

Rorsted said the company had been trying to engage with Chinese partners and customers “in a respectful way” and that Adidas was still expecting do well in China over the coming year.

In North America, Adidas sales grew 8.1 percent in currency-neutral terms to 1.16 billion euros. In Europe, the Middle East and Africa, growth stood at 7.6 percent, with net sales of 1.77 billion euros.

In all territories, Adidas came closer to sales revenue seen in 2019. This was despite the fact that in Europe, around half of Adidas’ stores were closed mid-March as the continent continued to struggle with its third wave of COVID-19 infections. However by the end of March, 89 percent of all of its retail points around the world were open again, including most stores in Europe. “And that [store openings] is at 91 percent as of today,” Rorsted added.

Besides the lockdown, the company was dealing with logistics challenges. Freight costs were higher and there was limited container capacity which meant that some North American retailers were still waiting for stock, Rorsted said.

Had it not been for those lockdown and logistics challenges, both Rorsted and Adidas’ chief financial officer, Harm Ohlmeyer, stressed that growth would have been in higher double digits in both Europe and North America.

Footwear made up roughly two-thirds of Adidas’ revenues and grew 31 percent, in currency neutral terms, compared to 2020, bringing in 2.93 billion euros in sales. Apparel grew 28 percent to 2.1 billion euros.

EBITDA grew 172 percent to 978 million euros in the first quarter, reflecting the low comparative baseline beginning of the pandemic. EBITDA came to 1.16 billion euros over the same period in 2019.

The Adidas executives also addressed the much-discussed sale of the company’s other label, Reebok. Ohlmeyer disclosed that Reebok’s net sales were also “up double digits” in the first quarter and that its order book was full. Adidas has stopped reporting Reebok’s financial details during the sales process.

“We are in the middle of the process and of course we are talking to many interested parties. The interest is global, not limited to specific markets,” Ohlmeyer said. “Of course, we are sharing some information [with interested parties] during these talks as well. That’s the normal process. Our expectation is that we are aiming for closing [the sale] not until yearend. That’s the direction we are heading.”

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