Mixed Covid fortunes for big brands: Adidas v Mr Kipling

Sportswear takes a hit during pandemic, but confectionary gets a boost

Adidas has warned of a further Covid hit to earnings and sales

The latest round of Covid restrictions across Europe is resulting in mixed fortunes for many leading consumer brand owners.

Adidas is one of the first consumer-goods companies in Europe to warn that renewed lockdowns will weigh on its earnings again and bring a swift end to a recent sales rebound.

The shoemaker’s revenue is no longer on track for growth in the fourth quarter, the German sportswear maker said, predicting a low- to mid-single-digit percentage decline.

A number of company stores have already closed in recent weeks amid a resurgence of coronavirus cases while stricter social distancing guidelines are slowing customer traffic in brick-and-mortar shops in Europe.

The prospect of further restrictions could make the guidance out-of-date, as the forecast assumes that 90% of stores remain open. Currently the figure is 92%, CEO Kasper Rorsted said. In Europe, 40% of stores are already closed.

For now, Adidas is looking to control what it can amid the whipsawing swings of the pandemic. 

It’s focused on cutting costs, promoting e-commerce and shoring up liquidity with a series of bond sales and a €1.5bn syndicated-loan facility through 2025. That allowed the company to replace a German government-backed package Adidas took on this spring.

Mr Rorsted declined to comment on reports that the company is conducting an internal review on whether to sell the Reebok brand.

Sales returned to growth in Europe in the third quarter after a prolonged slump in the German company’s home region. North American revenue had gained in July and August, but a dismal September led to a decline for the third quarter, as back-to-school shopping didn’t materialise. Business in Asia slowed down even more amid Covid restrictions in Japan and inventory management in China, Mr Rorsted said.

Nevertheless, third-quarter operating profit reached €794m, beating analyst estimates.

However, the pandemic is benefitting another consumer goods giant. 

Britain’s Premier Foods – the maker of Mr Kipling cakes, Oxo stock cubes and Bisto gravy - has lifted its full-year trading profit outlook again, as it expects rising demand for its products during Covid-led restrictions on eating out.

Premier expects “continued revenue growth” in the second half, after double-digit growth from key brands in the first half.

New products will help drive up revenue, as will heightened demand for existing products while restaurants and pubs are closed during a four-week lockdown across England that began last week, the company said.

Elsewhere, British housebuilder Persimmon has declared another interim dividend, of 70 pence per share, and said it was fully sold up for the current year as it benefitted from firm selling prices and strong demand for its new build homes.

Additional reporting Bloomberg and Reuters