Adidas expects to bounce back to profitability in Q3 after pandemic hit

BERLIN (Reuters) - German sportswear firm Adidas said on Thursday it expected to bounce back to profitability in the third quarter after it plunged to a big loss in the second quarter when the majority of its stores were closed due to coronavirus lockdowns.

Shares in the company, which are down 17% this year, were up 3.92% at 0711 GMT.

Adidas reported a second-quarter operating loss of 333 million euros ($396 million), worse than the 290 million euros expected by analysts on sales down 35% to 3.579 billion euros, ahead of analyst consensus for 3.3 billion.

Jefferies analyst James Grzinic said the sales decline was much less than feared in Europe and North America - down 40% and 38% respectively - as Adidas was supported by its strong ecommerce operation, while Asia was weaker than he expected.

Adidas said its sales were flat for the second quarter in China, where it saw double-digit growth in May and June.

The quarterly loss included coronavirus-related charges of around 250 million euros, mainly due to an increase in inventory and bad debt allowances, as well as the impairment of retail stores and the trademark of its struggling Reebok brand.

Inventories hit 5.2 billion euros at the end of June, up 20% from the end of March.

Adidas expects a material improvement in third-quarter sales assuming there are no new major lockdowns, but still down on 2019 by a mid- to high-single-digit rate.

It sees an operating profit of between 600 million euros and 700 million euros in the period.

It declined to give an outlook for the full year.

"We are now seeing the light at the end of the tunnel as the normalisation in the physical business continues," Chief Executive Kasper Rorsted said in a statement.

Ecommerce sales jumped 93% in the quarter and remained at a very high level even as stores started to reopen, with 92% already back in business, albeit with reduced opening hours.

Rivals Nike Inc and Puma also reported quarterly losses, while Nike saw a 75% rise in online sales.

($1 = 0.8418 euros)

(Reporting by Emma Thomasson, Editing by Thomas Escritt, Edmund Blair and Giles Elgood)

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