Adidas, Nike And Other Sports Giant Epidemic Crisis

On the evening of March 11th, Adidas disclosed its 2019 annual earnings report, and for the first time announced the impact of the new crown pneumonia epidemic on China's market. Since the Spring Festival of China in January 25th to the end of February, Adidas's income in Greater China has dropped by about 85% compared with the same period last year.

Adidas has about 1.2 stores in China, most of which are franchised stores and nearly 500 outlets. There are more than 1300 outlets in the world. Products close to 1/5 are produced by Chinese factories. Under the impact of the new crown virus pneumonia, sales in the Adidas Greater China market will be reduced by 800 million to 1 billion euros in the first quarter of fiscal year 2020, and operating profits will be reduced by 400 million to 500 million euros. Prior to the 2019 fiscal year, Adidas revenue reached 236.4 euros.

With the initial control of China's epidemic situation, Adidas stores and logistics warehouses in China have gradually resumed operation, and consumer traffic has slowly recovered, and the global procurement links have not yet been affected. In order to prevent the backlog of products on the market, Adidas suspended shipments to all wholesalers in February and is likely to withdraw stock from wholesalers and resell them at the outlets later this year.

The battlefield is transferred overseas. Last Tuesday, in order to curb the spread of the new crown pneumonia epidemic, Adidas announced that it temporarily closed the Adidas and Reebok stores in Europe and North America. The European stores closed in from March 18th to 29th, while the stores in the United States and Canada closed in from March 17th to 29th.

Another sports giant Nike announced the closure of all offline retail stores in the United States on March 15th, with a planned recovery date of March 27th. Nike retail stores in Canada, Western Europe, Australia and New Zealand have been closed since March 16th, at least until March 27th. Retail stores in China, Korea, Japan and elsewhere continue to open. Nike said consumers can shop through the official website and Nike App. During this period, the affected employees will still pay full wages. Nike encourages employees to work at home, stagger working hours, maintain social distance, and take extra safety and cleanliness measures.

Although Nike has vigorously developed the international market in the past 10 years, it still relies heavily on the US business. In 2019, about 40% of Nike sales came from the US market, higher than Adidas, followed by EMEA (Europe, Middle East and Africa), and sales accounted for 25%. Statistics show that by the end of 2019, Nike had 384 retail outlets in the United States and over 750 shops worldwide.

From mid February to March 10th, Nike's sales in the world dropped by about 21% over the same period last year. The Cowen report released by the US investment bank points out that the sales volume of Nike group will drop by about 34% in the fourth quarter of May, and the damage will be about $3 billion 500 million. Woozle Research estimates that Nike revenue may lose more than $5 billion 500 million over the next six months. In the 2019 fiscal year, Nike's global sales volume was $39 billion 100 million.

With the cancellation of the European Cup and the postponing of various sports events, the main battlefield of sports products sales of Adidas and Nike was badly hurt. The successive blow up of US stocks has made the two big tycoons hit hard.

On the day of fusing, Adidas dropped to a minimum of $91, compared with a high of $176.36 in January, and Adidas lost about $33 billion 800 million of its market value. Nike's share price has dropped from $103 to $68 in the past month, and its total market value has shrunk by about 1/3 this year.

The same happens in sports retailers such as Under Armour, Puma and New balance. Puma has said that the situation in the coming weeks and months is hard to predict, so it is impossible to quantify the impact of the epidemic on annual revenue and profits.

This shock effect cascading to the end of the supply chain.

Nike and Adidas have suffered the worst performance since 2020 in China's main distributors and distributors Baosheng international.

Baosheng International's 2020 February earnings bulletin showed that the net income of the company's consolidated operation was about 308 million yuan, down 82.32% from the same period last year. In the first two months of February 29, 2020, the company achieved a total accumulated operating income of 3 billion 433 million yuan, down 19.22% from the same period last year. Baosheng international shares have fallen by 31% since the beginning of January.

Fengtai is a major supplier of Nike footwear, and now 9 subsidiaries in China have been resumed. But affected by the epidemic, there may be a crisis of material failure.

Taiwan Baocheng International Group is the largest group of sports shoes and casual shoes in the world. It is designed, manufactured and produced for internationally famous brands such as Nike, Adidas, New Balance, Asics, Timberland, Converse and so on. It produces over one hundred and seventy million pairs of sports shoes annually and has a global market share of over 15%. Baocheng said the production base had been transferred to Vietnam and other places, but plastic and leather materials had to be imported into China. Baocheng accounts for 13% of its output in the mainland. At present, except for China's factory area, Hubei has basically resumed operation.

The development of the epidemic has brought heavy losses to sales, making it possible for us to make horizontal comparisons between international brands and domestic manufacturers.

After the outbreak, domestic brands, such as Anta, Lining, XTEP, 361 degree, and so on, have been pushing the online sales platform and selling them in discounts, thanks to the pressure of retail stores. Through the direct broadcast platform, drive online sales. The employees are temporarily playing the role of "micro business", releasing products and preferential information on social platforms such as WeChat friends circle as a response measure during the epidemic.

A staff member of a domestic clothing brand said that the company promptly increased the online layout after the outbreak. In order to improve the online sales volume, every employee was required to forward the layout of the product every day in the circle of friends, not to group display, and the sales staff reported the sales volume on the day, week and month.

International brands have been dominated by offline sales. At present, the loss and loss of sports brand production and sales in the first half of 2020 have been inevitable. In the future, international brands represented by Adidas and Nike should increase investment in online business and make greater changes in the digital field.