Adidas AG reported ecommerce revenue rose 37% in the second quarter ending June 30. Exact figures were not disclosed. Total revenue increased 4.7% to 5.509 billion euro ($6.180 billion) from 5.261 billion euro ($5.900 billion). Adidas is No. 36 in the Internet Retailer 2019 Top 1000.
Second-quarter operating profit was slightly below the analysts’ forecast and confirmed 2019 targets, disappointing some investors who considered that outlook conservative.
One drag on earnings has been Adidas’s need to fly clothing from manufacturers in Asia to North America to fill a supply gap. The company has spent more on air freight to compensate for supply chain bottlenecks affecting mid-priced apparel in North America, which it said in March would cut full-year growth by 1 to 2 percentage points. The snags will probably affect the company through the third quarter, Rorsted said in an interview with Bloomberg TV.
“We are flying in products from Asia to make certain we can actually satisfy demand, which has been the constraining factor this quarter,” Rorsted said.
While Adidas results were broadly in line with expectations, they were not enough to “drive further excitement” among investors, given recent share gains, Morgan Stanley analyst Elena Mariani said in a note.
However, the sports retailer said it’s more worried about a currency war between the U.S. and China than the possibility that President Donald Trump will increase tariffs on footwear.
The German sportswear maker does as much as 45% of its business in the U.S. and China, and if the two countries weaken their currencies then it will ultimately come to hurt Adidas’s earnings when translated back into euros. There’s also the risk that such a conflict would slow down the world’s two biggest economies—and everyone else.
“There is no winner in a currency war,” CEO Kasper Rorsted said on a call with reporters. “Eventually everybody will lose because it will lead to a slowdown in the global economy.”
Fears of a currency war have rattled global markets this week, after Beijing moved to weaken the yuan amid Trump’s threat of new tariffs. Concerns eased slightly on Thursday when the People’s Bank of China set the daily fixing stronger than analysts expected.
Rorsted’s warning is significant because Adidas in May signed an open letter to Trump warning of the risks of tariffs. That document, also signed by Nike Inc. (No. 34), Puma SE and other footwear companies, said new levies on shoes made in China would be “catastrophic for our consumers, our companies and the American economy as a whole.”
The Adidas CEO said the German company was speaking for the footwear industry as a whole, rather than its own interests, when it added its name to the letter.
While the U.S. imports the “vast majority” of shoes from China, Adidas ships only a small number of products along that route, Rorsted said. The German company has about 20% of its manufacturing capacity in China, but many of the products made there go to local buyers, who represent about 25% of Adidas’s overall business, Rorsted said.
In other earnings news:
- Online homewares merchant Overstock.com Inc. (No. 48) generated $367.48 million in retail sales during the second quarter ending June 30, down 23.1% from $477.68 during the same quarter last year. Other revenue, including that from its blockchain efforts, rose 14.3% to $6.23 million from $5.45 million. Revenue from its private label products rose to 12% of retail revenue, or $44.10 million, during the quarter after a lull in Overstock pursuing those sales, CEO Patrick Byrne said on an earnings call transcribed by Seeking Alpha. In a year, he expects that number to rise to 30% of retail revenue.
- Meal-kit service Blue Apron Inc. (No. 97) shrank its losses by 76.5% to $7.7 million from $32.8 million for the second quarter ending June 30. Revenue declined 33.6% to $119.2 million from $179.6 million a year ago, as Blue Apron deliberately reduced its marketing spending. This quarter, marketing costs hit $9.7 million, or 8.2% of revenue, while last year during the second quarter, the meal-kit company spent $34.6 million, or 19.3% of revenue, on marketing.
Blue Apron also announced its ending its pilot program with Walmart Inc.-owned Jet.com, which let Jet customers order one-off Blue Apron meals. Walmart is No. 3 in the Top 1000. Blue Apron CEO Linda Findley Kozlowski said it will use what it learned about on-demand orders during the pilot as it explores expansion beyond on its current subscription model.
- QVC owner Qurate Retail Group (No. 9) generated $1.8 billion in ecommerce revenue, 59% of the company’s total revenue, for the second quarter ending June 30. Growth figures were not disclosed. Overall revenue, which includes sales from its TV operations and catalogs, decreased 3.7% to $3.11 billion from $3.23 billion during the same period last year. Mobile devices accounted for 68% of ecommerce orders for the quarter.