Introduction
For a successful company to showcase its trajectory and give potential and existing investors an image of its performance, it needs to establish solid sales forecasts. Adidas America Inc is a sportswear and footwear manufacturer founded in 1949 and is based in Germany (Cadestin et al., 2021). In regards to the market share, Adidas is the leading firm selling footwear in Europe, with a significant market share on a global scale (Cadestin et al., 2021). The company, founded by two brothers, has had incredible success in the past years. Owing to this success, Adidas had no problem creating ambitious forecasts for the year 2020. These forecasts, however, have met with numerous challenges resulting from the effects of the global COVID-19 pandemic. Businesses need to factor in unforeseeable events in developing forecasts.
Adidas Sales Forecasts and Performance in 2020
The wake of COVID-19 negatively impacted the sales performance of almost all companies, and Adidas was not any different. According to the Adidas annual report for the financial year 2020, the company claimed the year was unlike any other (Adidas, 2021). The set projections were based on a prediction of a fantastic year of sports that would be presented by events such as UEFA EURO 2020 and the Olympic Games in Tokyo (Adidas, 2021). These estimates, however, were slammed with a great vengeance from the global pandemic, which presented a disaster on a scale that the firm claims it had never seen before (Adidas, 2021). Adidas attributed the poor performance to the lockdowns imposed and the canceling of numerous sporting activities across the world. This led to the closure of 70 percent of Adida’s physical stores (Adidas, 2021). The company, also in the statement, acknowledged that there was no prior plan to deal with a situation like that presented by COVID-19 (Adidas, 2021). This shows the magnitude that unpredicted disasters may have on large companies.
The numerical projections of Adidas were badly affected by the unpreparedness of the firm in terms of having ready contingency plans. As a direct result of the COVID-19 outbreak, the company announced a 93 percent shortfall in profit estimates as well as a 19 percent drop in revenue in the first quarter of 2020 (Skinner & Smith, 2021). The Adidas firm was projected to make approximately $285.3 million in profits, but its first quarter of 2020 total of just $70 million fell far short of the forecast expectations (Thomasson, 2020). Moreover, it had a 19 percent drop in sales, which equated to $5.15 billion. These sales were also short of anticipated projections of a $5.26 billion sales amount (Thomasson, 2020). These statistics show that Adidas needs to modify its forecasting strategies and adopt a more flexible process that can be changed in the event of an unforeseeable risk.
Conclusion
Adidas had the difficult year 2020 in terms of sales, owing to the effects of the COVID-19 pandemic. The exceptional hardships of the coronavirus epidemic had a significant effect on the firm, led to store closures across the board, canceling of major sporting events, as well as decreased consumer visitation. This led to decreased sales that fell short of the forecasted estimates. The company did not have a ready contingency plan to handle the pandemic, and this was the main reason why COVID-19 hit Adidas hard. Moving forward, I would recommend that Adidas incorporate flexible forecasting strategies such as the creation of a manageable process that can be changed as circumstances change. Also, the company should include all aspects of the firm, such as employees, in the forecasting. From the observations of the Adidas case study on sales forecasts, I agree with the course material that sales forecasts are an important asset in meeting company goals. For this reason, they should be well-drafted with flexibility incorporated in drafting the forecasts. As such, the suggested modifications to Adidas forecasts can guarantee resilience in the event of future disasters.
References
Adidas. (2021). Adidas annual report 2020. Hosted Data. Web.
Cadestin, C., Jaax, A., Miroudot, S., & Zürcher, C. (2021). Multinational enterprises and intangible capital. Web.
Skinner, J., & Smith, A. C. (2021). Introduction: sport and COVID-19: impacts and challenges for the future (Volume 1). European Sport Management Quarterly, 1-10. Web.
Thomasson, E. (2020). Adidas says worse to come as profits and sales plunge. Reuters. Web.