Global Apparel Industry Is Facing Difficulties: ADI Q1 Plunged, GAP Employees Suspended Pay Leave

? ? Recently, sports brand giant Adidas (Adidas) released the first quarter fiscal year 2020 fiscal year report, due to the impact of the new crown pneumonia epidemic, resulting in the company's first quarter net sales fell 19% from last year to 4 billion 753 million euros, while the 65 million euro's operating profit and high operating costs also made the company's net income decrease 96% to 26 million euros, compared with the same period last year. More than 70% shops are closed.

According to the global times, in the early days of overseas outbreaks, Adidas released a data showing that Adidas's business activity dropped by 85% over the same period last year, compared with the same month last Spring Festival. The company also predicted that the second quarter sales will suffer a larger decline, which is expected to drop more than 40% over the same period, and the operating profit will be negative.

"The global outbreak of the new crown pneumonia epidemic poses severe challenges, and even healthy running businesses can not be spared. At present, we are focused on coping with the current business challenges and focusing more on the opportunities we see in China's market recovery and e-commerce business. " Rothd, chief executive of Adidas, said (Kasper Rorsted).

Public information shows that Adidas was founded in 1949 and named after its founder, Adolf Adi Dassler. Adidas ranked 481 in the world's top 500 in Fortune magazine 2019.

Cheng Weixiong, general manager of textile and clothing brand management and Shanghai Liang Qi Brand Management Co., Ltd., told time finance that international brands had been dominated by offline sales. At present, the loss and loss of sports brand production and sales in the first half of 2020 has been inevitable. In the future, the international brands represented by ADI and Nike will increase investment in online business and make greater changes in the digital field.

Stock explosion

On the evening of March 11th, Adidas disclosed its 2019 annual earnings report, which showed that the company's annual revenue reached 23 billion 640 million euros, a growth of 8% over the 2018 fiscal year and an increase of 12% to 1 billion 918 million euros in net profit in the year.

As the only way to maintain full operation in most parts of the world, Adidas's e-commerce business still maintained a 35% growth rate excluding the exchange rate factor, but this did not completely offset the substantial loss of physical retail revenue.

Adidas also mentioned in the earnings report that sales in the Greater China region decreased by 800 million euros, a drop of 58%. Although Adidas's market revenue increased by 8% in the first two months outside the Asia Pacific region, the negative impact of the closing of stores around the world has offset the increase in sales.

In addition, affected by the epidemic, Adidas closed more than 7 stores. Adidas announced in March 17th that it would temporarily shut down stores in Europe and North America, including brand self owned stores and franchised stores, in order to curb the spread of the new crown virus, due to health and safety considerations for employees, customers and partners.

In mid 4, Adidas issued a statement again, saying that almost all proprietary and dealer stores were temporarily closed in Europe, North America, Latin America, emerging markets, Russia and most parts of the Asia Pacific region. Wholesale and retail activities in the above markets were completely stagnant.

Meanwhile, Adidas's stock rose sharply. In April 19th, CreditSuisse issued a warning that Adidas would face a more severe inventory crisis in addition to closing short-term sales losses in Europe and North American stores. According to the results, as of the end of December 2019, Adidas's stock increased substantially from the same period a year ago, from 3 billion 450 million euros at the end of 2018 to 4 billion 90 million euros at the end of 2019.

In response, Adidas said it was mainly for ADI to prepare a large number of goods to welcome China's New Year Shopping Festival. But when the new crown pneumonia broke out coincided with the Chinese New Year holidays, many shops were suspended and the number of customers dropped sharply, resulting in a backlog of goods.

In order to clean up inventory as soon as possible, since March 8th, Adidas has launched several large-scale discount promotions in China, including online and offline. Time finance found in Jingdong and Tmall Adidas flagship stores, there were promotional activities during the May 1 period, and some of the products were promoted by 50 percent off.

According to surging news, Adidas CEO Rothd said: "despite the current situation is grim, but I still have confidence in the development prospects of Adidas's sports industry. Consumers' desire for healthy living is increasing day by day. They hope to shape better physique and keep healthy through sports. By accelerating the growth of retail and e-commerce business, we will achieve better long-term development. Our position is very correct. As a global company, our brand has a solid foundation. "

Cheng Weixiong believes that the current contradiction between user demand is not price competition, but supply of products with quality, cost-effective and personalized products. The maximization of user value and the diversification of experience services need to be greatly met. The online and offline interconnection of retail stores is driven by big data, and the ecology of brands, products, stores (platforms), users and so on is more closed.

How to save yourself?

Originally 2020 is a "sports year", affected by the epidemic, many large events were forced to cancel or postpone. In March 24th, the Tokyo Olympic Games, which had been in a "dilemma", was finally pressed by the "postponed key".

Prior to that, NBA also announced that the remaining 2019-2020 games were suspended for the rest of the season. According to the international financial daily, since the beginning of 2020, over 40 sports events have been postponed and cancelled due to the epidemic.

Since 2020, the performance of several garment giants has been declining. US apparel giant GAP8 million employees have been suspended from their pay, and the stock market has fallen 60% since February. GAP said that due to the closure of its stores during the outbreak of new crown pneumonia, it has lost 1 billion US dollars since February and is expected to have only 750 million dollars in cash flow next week.

Adidas's competitor, Nike, has had a hard time. In March 19th, Cowen, a US investment bank, released a report. Analysts estimate that sales of Nike group will drop by about 34% in the fourth quarter of May this year, and the damage rate will be about $3 billion 500 million, due to the closure of global stores and the halt of NBA and other league matches due to the outbreak of the new crown pneumonia.

Domestic clothing giants are also not optimistic. The latest data released by Anta sports show that Anta retail sales plunged 20% to 25% in the first quarter, compared with the same period last year, while the number of FILA brands declined.

At the same time, as of the first quarter of March 31, 2020, Lining sales point (excluding Lining YOUNG) recorded a high 10%-20% decline on the whole platform's retail sales. As far as channels are concerned, the downward line of 20%-30% recorded a low segment decline, of which retail channels recorded a decline in the middle of 30%-40% and a decline of 10%-20% in the wholesale channel. The virtual store business of e-commerce recorded a low 10%-20% growth.

In addition, Hai Lan's home revenue also declined in the first quarter. In April 28th, Hai Lan home disclosed that the first quarter of 2020 showed that the revenue of Hai Lan's home business was 3 billion 848 million yuan, a decrease of 36.80% compared with the same period last year. The net profit attributable to shareholders of listed companies was 295 million yuan, a decrease of 75.59% compared with the same period last year.

Cheng Weixiong said that for clothing enterprises, the biggest impact is sales. During the epidemic, fewer shops, less rents, and manpower wages are a great pressure on businesses. Although some shopping malls will enjoy concessions or even rent free, they will be a drop in the bucket. If the inventory is not promptly digested, it will affect the factory's capital return in spring, thereby increasing the capital turnover pressure of enterprises.