Adidas Accused of ‘Exploiting’ German Rent Deferral Law as Coronavirus Bruises Business

Adidas is tapping into protection provided by new rent-freeze legislation and deferring rent payments in Germany for the month of April. But some German officials are concerned that the company may be taking unfair advantage of the measure.

The legislation, which goes into effect on Wednesday and is meant to provide relief during the coronavirus pandemic, declares that anyone who does not pay rent between April 1 and June 30 cannot be evicted.

Adidas says that it will defer rent for the month of April because of this legislation. Other major companies, including fast-fashion chain H&M and footwear retailer Deichmann, have also indicated plans to defer rent payments. But this has spurred criticism from some German politicians.

“It’s irritating when large companies simply announce a halt on paying rent,”  Germany’s finance minister, Olaf Scholz, told local media. Federal Justice Minister Christine Lambrecht, meanwhile, called Adidas’ decision to defer rent “indecent and unacceptable.”

Katarina Barley, Germany’s former justice minister and a current European Parliament member, took the criticism a step further, calling Adidas “shabby” for “exploiting a protection rule for tenants” and indicating that she might never purchase the brand’s wares again.

In an email to FN, an Adidas representative explained that the company is temporarily deferring rental payments where stores are closed, noting that “this is not about not paying the rent for April at all. It is only a matter of a deferral.”

“We are in close contact with the landlords concerned. Our landlords, major property marketers and insurance funds, have for the majority shown understanding for this measure,” Adidas said. “The [coronavirus] crisis has impacted large parts of the world and the economy. Adidas has been severely affected by this, and the deferral of rent is just one of many measures we have to take as a precaution to protect the company and its 60,000 employees.”

Directly owned Adidas and Reebok units in Europe, the U.S. and Canada were shuttered two weeks ago. The company initially planned to reopen on March 29 but has extended closures with no end date announced at this time. Adidas’ digital operations remain active.

For the fiscal year 2019, Adidas’ currency-neutral sales rose 6%, in spite of supply chain issues the company faced due to an unforeseen rise in demand for mid-priced apparel. Reebok revenues were up 2% year over over, driven by an 18% increase in revenue across direct-to-consumer channels. Meanwhile, net income from continuing operations climbed 15% to 1.97 billion pounds ($2.23 billion), with earnings per share up to 18% to 9.97 pounds ($11.25).

When it reported those results on March 11, Adidas forecast a severe revenue impact due to the coronavirus. The athletic giant predicted revenue declines of up to $1 billion for the first quarter — and that was prior to store closures across the U.S., Canada and Europe.

“As the situation keeps evolving, we cannot yet reliably quantify the magnitude of the overall financial impact in 2020,” Adidas CEO Kasper Rorsted said in a statement at the time. “Regardless of the impact on our business, it remains our top priority to ensure the health and safety of our employees and their families.”

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