World Footwear

Companies

adidas updates financial outlook for the year

Aug 6, 2014
adidas updates financial outlook for the year
Germany based sportswear giant announces new financial targets and a set of new strategic measures
During the second quarter of the year the company' sales increased 10% on a currency-neutral basis, driven by 14% growth at adidas and 9% growth at Reebok, while sales at TaylorMade-adidas Golf declined 18%. Currency effects continue 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% reaching 3 465 billion US dollars. Net income attributable to shareholders for the quarter was 144 million US dollars.

According to a press release issued by the company: “Currency translation, less favourable hedging rates, higher marketing spend for the 2014 FIFA World Cup™ as well as a significantly lower contribution from TaylorMade-adidas Golf offset the otherwise strong underlying growth from adidas and Reebok in most major categories and markets”.

As part of the new strategy, adidas announced a restructuring program at TaylorMade-adidas Golf to align the organization’s expectations to the golf industry’s development, as well as an intention to reduce inventory.

As a consequence of recent trend change in the Russian rouble and increasing risks to consumer sentiment and consumer spending from current tensions in the region, Management has decided to significantly reduce its store opening plan in the market for 2014 and 2015, and to further increase the number of store closures.

A third measure announced relates to the momentum of the brand’ strong performance at the 2014 FIFA World Cup™ to step up marketing and point-of-sale investments over the next 18 months to secure and drive faster growth rates and market share gains, particularly in the developed markets such as North America and Western Europe.

An in-depth review of the Global Brands and Global Sales structures was also announced.

adidas’ 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 US dollars. In addition, the delivery of its Route 2015 targets has been postponed. “Everything we announced 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”, Herbert Hainer, CEO of the adidas group commented, adding: “While we have delivered notable achievements with our Route 2015 plan, we also accept that we have not executed to our high standards at all times or provided enough flexibility to react in adverse market conditions (…) By cleaning up markets, investing with more conviction in our growth opportunities and driving more agility through our new organisational set-up, we will return the Group to a higher and more consistent level of earnings growth in the mid to long term.”

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