Adidas forecasts profit growth as showdown with Nike looms
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By Bloomberg
Adidas AG forecast profit growth this year as the struggling German sportswear maker pours money into catching up to larger rival Nike Inc. in America.
Net income excluding some items -- such as its Rockport walking-shoe division, which is being sold -- will increase 7 percent to 10 percent, Herzogenaurach, Germany-based Adidas said in a statement Thursday. Adjusted profit fell 22 percent last year. The shoemaker maintained its dividend, while the Bloomberg forecast was for a cut.
“2014 was a year with ups and downs for the Adidas group,” Chief Executive Officer Herbert Hainer said in the statement.
Adidas, the No. 2 supplier of sports gear after Nike, is trying recover from a bruising year that saw it lose market share in the U.S. and Europe despite being the official sponsor of last summer’s soccer World Cup and abandon its 2015 sales and profit goals.
The shares traded 2.2 percent higher at 70.50 euros as of 9:12 a.m. in Frankfurt. The midpoint of the profit forecast range matches analysts’ estimates of 697 million euros ($770 million).
2020 Strategy
Hainer will give a long-range strategy plan March 26, when he’ll forecast sales through 2020 and unveil how Adidas will expand in the U.S. and make its products more appealing to the global teens that set trends in the sneaker and sportswear industry.
The shoemaker kept its annual dividend unchanged at 1.50 euros a share, appeasing shareholders battered by the 38 percent decline in the stock last year. The Bloomberg forecast was for 1.35 euros.
“Despite the ’end of the 2014 World Cup’ effect, Adidas managed to regain some market share in football footwear,” Cedric Rossi, an analyst at Bryan Garnier & Co. said in a note to clients today.
Weakness in its Russia business has also caused Adidas to delay planned store openings there and the company took a 78 million euro goodwill impairment charge related to Russia for last year.
The company is searching for candidates to replace 60-year- old Hainer, whose retirement is planned for 2017. It hired search firm Egon Zehnder to find candidates.
“In 2015 we will see sales increases across all our brands despite a tough comparison with the 2014 World Cup year as well as the geopolitical crisis in Ukraine,” Hainer said.
U.S. Independence
The CEO is increasing marketing spending in the U.S. and leaving more product and promotions decisions to managers in that market in a bid to make up ground and right a struggling golf business, whose revenue dropped 28 percent last year.
Revenue excluding currency effects will rise by a mid- single-digit percentage this year, Adidas also said. The company said it started a second tranche of stock buybacks under a 1.5 billion-euro program announced last year.
The company in January agreed to sell its Rockport walking- shoe division to a group including New Balance for $280 million.
Adidas reported that sales last year increased 2 percent to 14.5 billion euros, lower than a preliminary figure of 14.8 billion euros announced Jan. 23. Adjusted net income, excluding the goodwill-impairment cost, was 642 million euros, less than the 650 million-euros preliminary number.
It was also a wide miss of the 830 million to 930 million euro profit goal that Adidas scrapped in July.