Recently, Adidas signed a cooperation agreement in Suzhou to increase investment in its supply chain in China. Behind this move is that under the global market depression caused by the epidemic, it once again showed its emphasis on the Chinese market.
In the first quarter of 2020, Adidas, the world’s second largest sports brand, suffered a heavy blow. Net profit plummeted 96%. Affected by the global new crown epidemic, more than 70% of stores are closed!
From the official website to the e-commerce platform flagship store, Adidas has conducted various discount promotions in the past two months.
(Screenshot of Adidas official website)
Various stories about the giant’s fall from grace There are constant voices in the forum, but what I really want to say behind the scenes is that if a global giant like Adidas is like this, what about other brands?
This is not the end of the giants, but the life and death dilemma faced by the entire clothing and apparel industry under the uncertainty of the epidemic. This dilemma has completely exposed some important issues. out.
Giant crisis! ?
No, it’s the industry turmoil
Adidas is still the second largest sports brand in the world, although it once led the way in sports and fitness. Under the pressure of Under Armor, he served as the “third player” for two years, but finally regained the second position and proved his market position.
This time, Adidas’ data is really shocking. According to Adidas’ financial report data, excluding the impact of exchange rate factors, in euro terms, Adidas’ revenue in the first quarter of 2020 fell 19% year-on-year to 4.753 billion euros; operating profit decreased 93% year-on-year to 65 million euros; net profit was 26 million euros. It fell 96% year-on-year to 631 million euros in the same period in 2019.
At the same time, Adidas issued a profit warning. Sales may suffer a greater drop in the second quarter, with a year-on-year decline of more than 40%, and profits may be negative.
Although e-commerce channel sales increased by 35%, and increased by 55% in March alone, it was far from making up for the loss of overall performance.
The most frightening thing is that 70% of stores are still closed, and Adidas’ inventory backlog exceeds 1.6 billion euros (approximately more than 12.42 billion yuan).
According to The Paper, under huge financial pressure, the Adidas executive board stopped the company’s stock repurchase, gave up short-term and long-term bonuses in 2020, and even Long-term bonuses for one term of leadership were also eliminated.
While reducing expenditures, Adidas negotiated with the store landlords to postpone the payment of store rents. On the other hand, it also suspended the payment of dividends during the loan period as a condition for obtaining funds from German banks. A 3 billion euro revolving loan was borrowed. In late March, it was revealed that Adidas was in arrears with advertising fees. The reason was that production and operations were hampered due to the impact of the epidemic.
In fact, Adidas is just a microcosm of the entire industry, and the giants in the sports brand market are having a hard time.
According to foreign media reports, Nike, the world’s number one sports brand, expects sales to fall by approximately 34% in the fourth fiscal quarter ending at the end of May, with a loss of approximately 3.5 billion. US dollar, the stock price has fallen nearly 16% since the beginning of the year. Some foreign research companies believe that Nike’s revenue loss may exceed US$5.5 billion in the next three to six months.
Under Armor’s latest financial report also showed that in the three months ended March 31, operating income fell 23% year-on-year to US$930 million. Net loss during the period was US$589.7 million, compared with net profit of US$22.48 million in the same period last year. Since April, 80% of global businesses have been shut down. Second-quarter revenue is expected to drop 50% to 60% year-on-year.
This is already the case for the three major international giants. Naturally, life for domestic brands is also difficult.
In the last month, the performance reports of several major domestic brands have also been released. Anta’s retail sales in the first quarter lost up to 25%, Li Ning’s retail sales dropped by 10% to 20%, and Xtep’s retail sales dropped by 10% to 20%. Retail sales fell by 20%-25% year-on-year, and 361’s retail sales fell by 25%-30% compared with the same period in 2019.
Although the domestic epidemic has been effectively controlled, all industries have seen hope of recovery as soon as possible. However, although the epidemic is the most direct factor causing these impacts, for these brands themselves To me, this crisis is more like a mirror.
Stores are closed, thousands of games are cancelled, survival is not easy!
Affected by the epidemic, the retail and wholesale of these brands have been greatly affected.
1. Store closures
Over 70% of Adidas stores worldwide are temporarily closed, and many of the tens of thousands of stores in China are also temporarily closed. ; Nike has also closed most of its stores around the world, as have many other brands.
This also directly shows that even though online sales are growing rapidly, offline physical stores are still their main battlefield, and this situation cannot be changed in a short time. of.
2. Decreased willingness to consume
Being unable to freely go out for long periods of time, income falling, or even unemployment The impact on consumers’ enthusiasm for consumption must be huge, and it must also directly lead to a sharp drop in sales. mass consumer demand.
Finally, Mr. Li Wenliang believes that the opportunity for foreign brands such as Adidas and Nike is the explosion of the entire mainland Chinese market. Adidas’ move to increase investment in its supply chain in China is enough to prove that the Chinese market has once again attracted their attention.
But it should be noted that Chinese consumers are now increasingly demanding personalized experiences, that is, they hope that both products and services can be more suitable for Chinese people. Some of your own preferences, needs and physiological characteristics.
In terms of business formats, the epidemic has led to the outbreak of e-commerce again, but what all brands need to think about is not whether they should be mainly online or offline, but How to better combine online and offline. </p
