What’s going on?

• Adidas and Inditex (owner of Zara and Bershka) reported lower-than expected annual results, but their ecommerce businesses seem to take off.

What does that mean?

• With so many stores shutting down last year, Inditex’s revenue and profit fell short of investors’ expectations; the latter by over 20%. Since sales haven’t improved much this year either, it looks like annual profit would fall short again.
• Still, Inditex’s ecommerce segment grew almost 80% YoY – representing 1/3 of total sales. The same was applied to Adidas, which saw its online sales climb 53% – representing 1/5 of total sales.

Why should I care?

For markets: Strong ecommerce setup might be the key

• A strong ecommerce setup has enabled Adidas to sell directly to consumers (cutting off 3rd-party retailers), of which extra costs are expected to offset by additional sales and increased profitability.
  • E.g: with Nike, ecommerce already accounts for 1/3 of sales, and its stock is up over 50% last year compared to Adidas’s 33%.

The bigger picture: Identifying retailers at risk

• To spot at-risk retailers, look at whether their inventory is rising faster than sales, which might suggest that it’s been too slow to adapt to customer demands and will need to start offering big discounts to clear unsold stock.

Content source: Finimize (2021) Clickbait. Available at: https://www.finimize.com/wp/news/clickbait/ [Accessed on Mar 13, 2021]