Adidas Unscathed by Euro Postponement, Possible Olympics Cancellation

This summer’s European Championships became the latest sporting event to fall victim to the coronavirus on Tuesday.

UEFA has officially pushed the international soccer tournament back until next summer, following its suspension of the Champions League and Europa League last week due to the pandemic outbreak.

While the long-term impact of Coronavirus on Adidas’ business remains unknown, the postponement of the Euros will not be as substantial to financial performance as analysts believe.

Much of the sales derived from the event occur in the months before a ball was kicked, CEO Kasper Rorsted told shareholders on the company’s fourth-quarter earnings call last week.

The cancellation of the 2020 Tokyo Olympics offers up a similar scenario. The company believes that consumers will continue to buy footwear and jerseys, regardless of the events taking place. 

“When it comes to the two activities [events], a lot of the sales have already taken place,” Rorsted said. “So actually, the event itself is not the primary transaction place. It is prior to the event, and that’s why a lot of the product sales are taking place prior.”

While many international brands use the European Championships to market to soccer fans, Adidas’ relationship with UEFA dates back two decades. 

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The German apparel maker is currently the official match ball provider for the Euros as well as UEFA’s prominent club competitions. Adidas also has long-standing relationships with Spain, Germany, and Belgium’s soccer federations to outfit players on the field.

“We support UEFA’s decision and fully appreciate it,” an Adidas spokesperson said in an email. “The health and safety of all parties involved have absolute priority in such an exceptional situation.” 

Cancellation of the Olympic Games by the International Olympic Committee, coupled with the postponement of the Euros would result in losses of between $50 million and $70 million, according to company estimates. That equates to roughly 0.3% of Adidas’ total revenue in 2019. 

“[The events] have great brand exposure, but that’s the same for all brands,” Rorsted said. “But from a commercial standpoint, the risk related to these two events not taking place is fairly limited.”

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In November, Adidas CFO Harm Ohlmeyer forecasted that Euro 2020 sales in the fourth quarter would override sluggish company performance in its home market to that point. After witnessing a decline in European sales of 1.7% in the first half of its fiscal year, Adidas finished 2019 up 3.1% in total sales (to $6.1 billion) in the region. 

On its March 11 earnings call, Adidas said that it would temporarily operate its business in two segments due to coronavirus – China and the rest of its markets. Company guidance expects global sales outside of China to improve between 6% and 8% in its fiscal first quarter. 

Meanwhile, net sales in China are expected to drop by as much as $1.2 billion in the same period. Declines are additionally expected in South Korea ($110 million) and Japan ($1.1 billion). 

Adidas additionally joined Nike and industry distributors like Foot Locker in temporarily closing more stores across North America, Europe, and Asia this week.