Adidas CEO doubles down on ecommerce as 70% of its global stores remain closed

• Adidas is making a strategic shift to focus on its digital platform as more than 70% of its global store base remains closed during the coronavirus pandemic.
• The company said financial flexibility is key to its agenda and it would reallocate resources to "ecommerce, IT, and additional set-up."
• Adidas reported a 19% sales drop in the first quarter and warned of a further 40% sales decline during the second quarter of 2020.
• It said it plans to reopen global stores sequentially throughout May and June, and in the US by mid-May. Currently, 20 of its stores remain open in Europe.
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German sportswear giant Adidas plans to ramp up its digital presence as more than 70% of its global store base remains shut during the coronavirus pandemic.

The German sportswear titan posted a 19% decline in net sales to 4.7 billion euros ($5 billion) for the first quarter of the year on Monday after the coronavirus outbreak bought sales to a near standstill in some parts of the world.

"At the moment, we are focused on managing the current challenges and doubling down on the recovery in China and the opportunities we see in e-com," CEO Kasper Rorsted said in a statement on Monday.

In a call with investors after reporting earnings, Adidas underscored the importance of digital acceleration in its business model and its plans to ramp up this area of its business.

It pointed to financial flexibility — its ability to adapt to changing financial conditions — as being a key factor in its decision to reallocate resources to ecommerce, IT, and additional setup.

Adidas believes that while consumers remain home, ecommerce has become more important than ever before.

The fitness brand's first-quarter net income fell 97% versus the same period last year to 20 million euros ($21 million), hurt by significant revenue declines in China since the end of January as well as in Japan and South Korea at the end of March.

Sales from Greater China, which accounts for 23% of the brand's earnings, declined 58% in the year reflecting product takebacks in a "triple-digit-million euro amount" to manage inventory levels in the market.

US stores could open by mid-May

While 70% of the company's stores are closed, Adidas expects to operate in a different trading environment and is positive that the world will move forward from the current situation.

Given the uncertainty around store reopenings, the company said it would be unable to provide an outlook for the full year but added that it expects sales to be down more than 40% for the second quarter.

It aims to sequentially reopen stores throughout May and June and in the US by mid-May, although this would be dependent on local realities, the company said in the investor call.

"Twenty stores in Europe remain open and twenty more are to come," the firm said.

"Adidas is well positioned in the structural growth sporting goods industry, which benefits from secular shifts including increasing focus on self-health and wellness and casualization trends," analysts at RBC said in a note to clients on Monday. Coronavirus created "meaningful dislocation, which could lead to a prolonged recovery profile, given Adidas's wholesale distribution, if excess inventory is not aggressively addressed."