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Adidas Q3 Profit Down Y-o-Y, Improves Sequentially; Replaces KfW Syndicated Loan Facility

Adidas AG (ADDYY.PK,ADDDF.PK) reported Tuesday that its third-quarter net income attributable to shareholders declined 15.5 percent to 546 million euros from last year's 646 million euros.

Net income from continuing operations dropped 10.4 percent to 578 million euros from 644 million euros a year ago. Earnings per share from continuing operations amounted to 2.80 euros, down 14.2 percent from 3.26 euros last year.

Operating profit fell 11.6 percent from the prior year to 794 million euros. This represents an operating margin of 13.3 percent, down from 14 percent a year ago.

Compared to the preceding second quarter, the company's operating profit improved by more than 1.1 billion euros.

The company's gross margin decreased 2.1 percentage points to 50.0 percent.

Net sales decreased 7 percent to 5.96 billion euros from prior year's 6.41 billion euros. Third quarter revenues decreased 3 percent in currency-neutral terms. Brand adidas sales declined 2 percent, while Reebok revenues were down 7 percent.

E-com sales went up 51 percent with strong increase in full-price share. Inventories reduced by 10 percent compared to end of second quarter.

adidas recorded a strong sequential revenue improvement in the third quarter as more than 90 percent of the company's own-retail stores were operational, most of which had been closed for several weeks during the second quarter.

Traffic in the stores continued to improve yet remained significantly below prior year levels.

Looking ahead for the fourth quarter, operating profit is anticipated to be between 100 million euros and 200 million euros, and gross margin is expected to be around the prior year level.

The outlook assumes no additional major lockdowns, a store opening rate above 90 percent and no further material slowdown of global store traffic.

adidas CEO Kasper Rorsted said, "While at the beginning of the quarter we were on track for growth in Q4, a worsening of the pandemic in many regions of the world is again requiring our patience and support. ...we are now well-prepared to cope with these short-term uncertainties."

Separately, adidas said it has replaced the syndicated revolving loan facility under participation of KfW, Germany's state-owned development bank. The company had received the approval of the German government for the participation of KfW in the 3.0 billion euros syndicated loan earlier this year to face the coronavirus pandemic. adidas has paid back the 500 million euros portion drawn in July already in October including interest and fees, which had been agreed at customary market conditions.

Concurrently with replacing the KfW facility, adidas has secured a new 1.5 billion euros syndicated loan with several of its partner banks. The new loan facility will run until 2025 with a syndicate of partner banks.

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