GERMANY: Adidas shares plunge as FY outlook cut
- Cuts FY profit and sales outlook
- Plans to close Russia stores
- To restructure TaylorMade golf business
Adidas has had to make a number of “important strategic decisions” to drive profitability
Adidas shares plunged this morning (31 July) after the German sporting giant cut its earnings forecast and announced plans to close stores in Russia and restructure its TaylorMade golf unit.
In a trading update, the company said it now expects a mid- to high-single-digit currency-neutral sales increase and net income of around EUR650m (US$870.6m).
This compares to a previous earnings forecast of between EUR830m and EUR930m, and a group sales increase at a high-single-digit rate.
Adidas said it has had to make a number of "important strategic decisions" designed to secure and drive growth and profitability.
In Russia, a recent trend change in the rouble, as well as increasing risks to consumer sentiment resulting from current tensions in the region, point to higher risks to the short term profitability contribution from the region, it said.
As a result, the firm 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.
In addition, Adidas also cut expectations for its TaylorMade golf business, which it said was suffering from poor retail sentiment and the slow liquidation of old inventory in the category.
The company said it plans to take further measures to reduce inventory in the second half, and begin a restructuring programme designed to align costs to match lower expectations for the golf industry's development.
Adidas, which is due to report its full results next week, said second-quarter sales increased 10% on a currency-neutral basis, driven by 14% growth at Adidas and 9% growth at Reebok. Sales at TaylorMade, however, declined 18%.
Net income attributable to shareholders for the quarter was EUR144m, compared to EUR172m last year.
"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," said CEO Herbert Hainer. "As we gear up for our next five-year strategic plan, we will assert ourselves much more aggressively in the marketplace."
Adidas' share price was down 11.57% to EUR62.02 at 08:59 GMT.
Adidas will need to up its game if it wants to outpace rival Nike in Western Europe, particularly in the area of social media, analysts have said....
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