Adidas expected good momentum in the underlying business pre coronavirus Adidas has reported FY19 results and given FY20 guidance, which implies management expected FY19 momentum to continue into FY20 pre impact of coronavirus. The company guided to FY20 currency neutral sales +6 to +8% (US low double-digit, Asia/Emerging markets high single-digit/Europe mid-single) with an operating margin at 11.5%-11.8% and net income +10%-13%. This outlook does not reflect any impact from coronavirus. For FY19, it delivered currency-neutral revenues +6%, operating margin 11.3% and net Income +12%, with DPS +15%. China and e-commerce both achieved double-digit sales growth. Adidas’ coronavirus impact to date has been mainly direct exposure to China. It expects revenues in Greater China in the first quarter of 2020 to be between € 0.8 billion and € 1.0 billion below the prior year level. Consequently, operating profit in Greater China is anticipated to decline between € 0.4 billion and € 0.5 billion in the first quarter. Management comments that it is working with its wholesale partners to ensure inventory levels remain healthy in the market. February’s shipments were cancelled and as a result could lead to the acceptance of a significant amount of product takebacks, which the company plans to clear through its own channels throughout the remainder of the year. It has started to observe traffic declines with a corresponding negative business impact in Japan and South Korea. On supply chain, Adidas is saying there has been some disruption but the majority of factories in China are operational again and global sourcing activities have not been impacted so far. The extent of spillover into other countries as well as the availability of raw materials remain largely uncertain and the future impact cannot be quantified. Next news from JD Sports – 15th April FY results to end of January From JD Sports’ perspective, management was comfortable with its supply levels and had good visibility on stock until post Easter when China shut down around Chinese New Year. Given the scale of JD Sports globally, we would not be surprised if JD Sports helps Adidas clear surplus stock in H2. In the meantime, like all retailers, JD may face some short-term demand issues depending on how coronavirus impacts daily life in Europe and the US over the coming months. Next news – FY results on 15th April.