What's going on?

Sportswear giant Adidas and fashion firm Inditex reported annual results on Wednesday, and you won�t believe what happened to their ecommerce businesses�

What does this mean?

It�s no secret that Inditex � owner of Zara and Bershka � has had plenty of shuttered stores to deal with in the last year. So the fact that revenue and profit fell so far short of investors� expectations � the latter by over 20% � suggested something else was going on, though it�s not certain what. And since sales haven�t improved much this year either, annual profit looks like it�ll fall short again.

Still, it could�ve been worse: Inditex�s ecommerce segment looked strong, growing almost 80% compared to the year before and now representing a third of total sales. That was true of Adidas too, which saw its online sales climb 53% � bringing them to a fifth of the sports brand�s total sales.

Why should I care?

Zooming in: Direct to consumer means direct to profit.

A strong ecommerce setup has enabled Adidas to sell directly to consumers, rather than via third-party retailers that take a cut of the profits. It comes with extra costs along the way, sure, but investors won�t mind if that�s offset by additional sales and increased profitability. Just look at Nike: ecommerce already accounts for a third of its sales, and its stock is up over 50% over the last year compared to Adidas�s 33%. Swoosh.

For you personally: There�s no dressing up weak sales.

Lockdown-bound shoppers are opting for sweats over fashion these days, and that could leave slow-moving retailers � some of which take nine months to get new clothing into stores � in a bind. So when you�re trying to spot at-risk retailers, look at whether their inventory is rising faster than sales: it might suggest the retailer�s been too slow to adapt to customer demands and will need to start offering big discounts to clear unsold stock.