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Adidas predicts strong rebound despite Reebok hit

10 March 2021 17:59 (UTC +04:00)

German sportswear maker Adidas AG expects a strong China-led recovery in sales this year, though profit will be trimmed by costs associated with divesting its Reebok brand, APA reports citing Reuters.

Preparing to presenting its 2021 outlook on Wednesday as part of its five-year strategy, Adidas said it has reopened 95% of its stores after coronavirus lockdowns and expects 2021 sales growth rate in the mid-to-high teens, rising to as much as 30% in greater China, the rest of Asia and Latin America.

Adidas shares rose 3.5% by 0853 GMT, making them the strongest gainer on the German blue-chip index.

“The 2021 outlook appears broadly consistent with consensus estimates once Reebok stranded costs are added back,” said Jefferies analyst James Grzinic.

Rival Puma last month said it expects the financial impact from lockdowns to last well into the second quarter but that pandemic-driven growth in running should help to support a strong improvement after that.

Adidas reported fourth-quarter sales up by a currency-neutral 1% at 5.55 billion euros ($6.59 billion) while operating profit slipped slightly to 225 million euros, ahead of the 5.47 billion and 202 million euros expected by analysts.

About half of its stores were closed in Europe in the period, but online sales grew 43%.

As part of its new strategy, Adidas will manage greater China as a separate market from the rest of Asia and it has integrated Europe, Russia and emerging markets into a new Europe, Middle East and Africa (EMEA) region.

For EMEA, Adidas expects sales growth in the mid-to-high teens, but only a high single-digit percentage in North America.

Net income from continuing operations is projected to rise to between 1.25 billion and 1.45 billion euros.

However, Adidas expects a hit of about 250 million euros to operating profit from costs to make Reebok a standalone company, with a third of that in 2022 but none in 2023.

Adidas last month said that it plans to sell or spin-off the underperforming brand, 15 years after it bought the U.S. fitness label to help it compete with arch-rival Nike Inc.