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Adidas fears decline as European lockdowns return

German sportswear firm Adidas expects sales to decline in the last three months of the year despite forecasting a return to growth in China, as coronavirus lockdowns return.

Third-quarter sales fell by a currency-neutral 3 per cent to 5.96 billion euros (US$7.05 billion), while operating profit fell 12 per cent to 794 million euros, ahead of average analyst forecasts for 5.91 billion and 723 million respectively.

Adidas expects a similar level of sales decline in the fourth quarter based on more than 90 per cent of its stores staying open and shopper numbers not being hit too much by new lockdowns. About 93 per cent of stores are currently open.

“While at the beginning of the quarter we were on track for growth in Q4, a worsening of the pandemic in many regions of the world is again requiring our patience and support,” CEO Kasper Rorsted said in a statement.

“The short-term outlook appears less constructive given the current shape of demand and a rebuild in costs,” Jefferies analyst James Grzinic wrote in a note.

Sales of the Reebok brand fell 7 per cent. Adidas has declined to comment on a magazine report earlier this month that it is planning to sell Reebok, which has struggled since being bought by Adidas in 2005.

Adidas predicted a return to growth in greater China in the fourth quarter, even though the year-ago period was strong, and said it expects a fourth-quarter operating profit of between 100 million and 200 million euros.

Sales rose 4 per cent in Europe in the third-quarter, but fell 1 per cent in North America and 5 per cent in greater China as initial pent-up demand faded after coronavirus restrictions were lifted. Ecommerce sales jumped 51 per cent.

German rival Puma reported a strong rebound in third-quarter sales in the Americas and Europe.

Adidas also said it had replaced a loan it secured during the early stages of the pandemic with state-backed bank KfW with a 1.5 billion euro syndicated loan with partner banks.

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