30 Apr 2020
Posted in Retail
The online channel is failing to offset revenue lost from retail store closures following Adidas’ Q1 results
Following the news that Adidas reported a 19% decline in net sales in the first quarter of 2020;
Luke Gowland, Thematic Analyst at GlobalData, a leading data and analytics company, offers his view on the company’s current challenges:
“Adidas has suffered at the hands of COVID-19. The brand has reported a decline in net profits of 97% and a revenue decrease of 19% to €4.8bn in the first three months of 2020. Economic uncertainty has squeezed the budgets of consumers and reduced discretionary spending. Adidas’ results reflect the scale of the impact.
“With 70% of its stores closed worldwide, Adidas is reliant on its ecommerce channels. Despite the company’s ecommerce revenues growing by 35% in the first quarter of the year, the channel has not been able to offset revenue lost due to store closures. With the pandemic likely to drag on for some time yet, the company is bracing itself for an expected 40% decline in second-quarter sales.
“While the situation is largely out of the company’s control, Adidas can try to influence customer spending. The immediate priority for the company should be to reinforce its online channel, improving the user experience and adding functionality to make shopping online more accessible and attractive. Adidas should integrate visualization technologies like augmented reality into its websites, making it possible for customers to virtually try on clothes and see what they will look like in a range of colours and styles, all from the comfort of their own homes.”