Commenting on the financial development in the first half of the fiscal, Herbert Hainer stated, “It is with disappointment that after such a great summer of sport, I have to report that our Group has not been able to meet the high expectations we laid out in our Route 2015 agenda. We take full responsibility to rectify our shortfalls swiftly. For the remainder of 2014, our priority is to sustain the momentum we have in key categories and markets, and take corrective steps to bring more stability to our future earnings.”
In the first half of 2014, currency-neutral adidas Group sales grew in all regions except North America. Revenues in Western Europe increased 6 percent on a currency-neutral basis, driven by sales increases in Germany, Spain, France, Poland and the UK. In European Emerging Markets, Group sales were up 21percent on a currency-neutral basis, with double-digit sales increases in all of the region’s major markets. Currency-neutral sales for the Adidas Group in North America decreased 10 percent, mainly due to double-digit sales declines in the USA.
Sales in Greater China increased 8 percent on a currency-neutral basis. Currency-neutral revenues in Other Asian Markets remained stable, as sales increases in South Korea and India were offset by declines in Japan. In Latin America, sales grew 25 percent on a currency-neutral basis, with double-digit increases in most markets, in particular Argentina, Brazil, Mexico and Colombia.
The gross margin of the Adidas Group decreased 1.0 percentage points to 49.2 percent in the first half of 2014 compared to 50.1 percent in 2013. Gross profit decreased 4 percent in the first half of 2014 to 3.440 billion euros (4.604 billion dollars) against 3.575 billion euros (4.785 billion dollars) in the prior year. Group operating profit declined 25 percent in the first half of 2014.
On July 31, 2014, the Adidas Group updated its full year 2014 financial outlook, taking into account the continued weakness in the golf market as well as recent developments in Russia/CIS. In addition, management announced strategic measures, which will impact the Group’s financial development in the second half of 2014 and in 2015. As a result, sales are now expected to increase at a mid- to high-single-digit rate on a currency-neutral basis in 2014. In particular the Adidas brand will benefit from the 2014 FIFA World Cup, where Management expects record sales of 2 billion euros (2.6 billion dollars) in the football category. However, poor retail sentiment and a slow liquidation of old inventory in the golf market will have a significant negative impact on revenues in the TaylorMade-adidas Golf segment and weigh on the overall Group sales development. In addition, currency translation is expected to negatively impact our top-line development in reported terms.
In 2014, the adidas Group gross margin is forecasted to decrease to a level between 48.5 percent and 49 percent. In 2014, the Group’s other operating expenses as a percentage of sales are expected to increase (previously: around the prior year level) compared to the prior year level of 42.3 percent. Sales and marketing working budget expenses as a percentage of sales are projected to increase (previously: to increase modestly) compared to the prior year.