Both Adidas and Nike should also benefit from increased spending on health and wellness as people shift priorities and learn to live with a health threat. Unlike those selling luxury apparel and accessories, they aren’t dependent on the travel retail sector, where demand is likely to be depressed for some time.
But for Adidas, the expectation for such an outsized profit swing in the third quarter assumes that about 90% of its stores remain open, and visits to those outlets continue to pick up. With parts of the U.S. far from returning to normal and a resurgence of cases in some European markets raising fears of a second wave, that assumption might not hold.The company said its forecast takes into account an impact from consumers pulling in their purse strings. But with pressure on consumers on both sides of the Atlantic as stimulus measures come to an end, potentially accompanied by an increase in unemployment, it is possible the nascent recovery could slow. That could make it harder to reduce inventories, which rose 49% in the second quarter excluding currency movements, to a more normal level by the end of the year.Adidas has all to play for to show that its expectations are grounded in reality, not wishful thinking.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.
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