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Customers browse sports apparel inside the Adidas AG store at the company's headquarters in Herzogenaurach, Germany, on Thursday, March 3, 2016. German sport-shoe maker Adidas forecast sales and earnings to increase as much as 12 percent this year as consumers spend more ahead of the Euro 2016 soccer tournament. Photographer: Krisztian Bocsi/Bloomberg

Coronavirus to cut Adidas profit by half a billion dollars

Customers browse sports apparel inside the Adidas AG store at the company's headquarters in Herzogenaurach, Germany, on Thursday, March 3, 2016. German sport-shoe maker Adidas forecast sales and earnings to increase as much as 12 percent this year as consumers spend more ahead of the Euro 2016 soccer tournament. Photographer: Krisztian Bocsi/Bloomberg

Adidas AG forecast the coronavirus will cut first-quarter profit in China by about half a billion dollars, while German rival Puma SE said it no longer expects any recovery in the short term.

The Adidas logo sits on a window inside an Adidas AG Originals store in Berlin, Germany. Photographer: Krisztian Bocsi/Bloomberg

The German sportswear maker forecast first-quarter revenue will drop 10 per cent, stripping 400 million euros to 500 million euros ($450 million to $570 million) from profit. Puma said Wednesday that it can’t quantify the potential impact of the disease outbreak, and so last month’s target for a 10 per cent increase in revenue this year no longer applies.

Sportswear demand will take longer to recover than other consumer goods, Adidas Chief Executive Officer Kasper Rorsted said in an interview with Bloomberg TV.

“We are on the end of the food chain,” he said. “If you’ve been sitting for two weeks in an apartment, your first thought is not to buy a pair of sneakers, it is to restore your fridge.”

– Adidas Chief Executive Officer Kasper Rorsted

Shares of Adidas fell as much as 8.8 per cent in Frankfurt, while Puma dropped six per cent.

Adidas declined to estimate the full-year impact of the spread of Covid-19, which will be worse because business is already also slowing in Japan and South Korea even as China starts to recover. Chinese sales will drop by as much as 1 billion euros in the first quarter, while the company expects a 100 million-euro drop in Japan and South Korea.

Customers browse sports apparel inside the Adidas AG store at the company’s headquarters in Herzogenaurach, Germany on March 3, 2016.

“We’re concerned about the dimensions of 2020 and potentially the year following, but we also know from the past that viruses will pass,” Rorsted said. “My company is not going to get any better if I run around being in panic.”

The company would lose 50 million to 70 million euros if the Olympics and the Euro Cup games are postponed. The apparel maker gets almost a quarter of its revenue from China and has about a fifth of its production there. Rorsted said he isn’t overly concerned about supply chain shortages.

A young customer carries sporting goods inside the Adidas AG outlet store at the company’s headquarters in Herzogenaurach, Germany, on Wednesday, March 14, 2018.

Excluding the epidemic, Adidas projected currency-neutral sales would grow six to eight per cent this year. That’s slightly more aggressive than last year’s forecast around this time, which was five to eight per cent.

Adidas said sales slumped 80 per cent in China last month, but stores and warehouses have gradually reopened and consumer traffic is slowly picking up. To try to prevent a glut of unsold products on the market, Adidas cancelled all wholesale shipments to retailers in February and it may take back a significant amount of stock from its partners, which Adidas will put up for sale in its own stores later this year.

Deals have been popping up in Asia for Adidas products, including buy one-get one free offers in Hong Kong.