Russian market and golf push Adidas to lower FY14 profit outlook

Thursday, 31 July 2014
REPORT_ Following a meeting of the Executive Board of Adidas, the management has updated its financial outlook. Management now expects a mid- to high-single-digit currency-neutral sales increase for the full year 2014 and net income attributable to shareholders to be at a level of around 650 million euros (870.2 million dollars). In addition, management has postponed the delivery of its Route 2015 targets.

For the second quarter, the Group sales increased 10 percent on a currency-neutral basis, driven by 14 percent growth at Adidas and 9 percent growth at Reebok, while sales at TaylorMade-adidas Golf declined 18 percent. Currency effects continued to play a significantly negative role, impacting top-line results by over 7 percentage points in the quarter. As a result, sales in euro terms increased 2 percent to 3.465 billion euros (4.639 billion dollars). Operating profit in the second quarter was 220 million euros (294.7 million dollars).

Following the strong top-line improvements at brand Adidas and Reebok as well as recent developments in Russia/CIS and in the golf market, the Group has taken a few strategic decisions, which in turn are expected to impact the financial development in the second half of 2014 and in 2015.

“Everything we announced today has one objective: to strengthen our brands, to drive consumer desire, and to set our Group up for long-term success. As we gear up for our next five-year strategic plan, we will assert ourselves much more aggressively in the marketplace,” opined Herber Hainer, CEO of the Adidas Group.

The decision includes, to ensure the successful execution of strategy to drive long-term margin improvements in the golf category, by reducing inventory in the marketplace in the second half of 2014. Secondly, owing to the recent trend change in the Russian rouble and low consumer sentiment, management has decided to significantly reduce its store opening plan in the market for 2014 and 2015 apart from shutting some of the existing ones. After the strong performance at the 2014 FIFA World Cup, and improving momentum at brand Adidas and Reebok, company has decided to up investment in marketing and point-of-sales over the next 18 months for faster growth in the developed markets such as North America and Western Europe. The group has also initiated a new organizational structure that will take effect on August 1, 2014.

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