• Q3 earnings fall to EUR282m
  • Gross margin narrows to 47.4%
  • Revenues up 6%
Adidas has made a series of profit warnings

Adidas has made a series of profit warnings

German sporting giant Adidas has reported a drop in third-quarter profits and gross margin due to continuing weakness in emerging markets, but reaffirmed its guidance for the full year.

CEO Herbert Hainer said the company has been aggressively addressing restructuring at its TaylorMade Golf unit, adjusting its business in Russia and intensifying efforts to revive momentum and growth in the US.

Earnings in the three months ended September, however, fell to EUR282m (US$352.1m) from EUR316m in the prior year, due to negative currency effects and a continued sales decline at its golf division.

The sporting goods retailer, which has made a series of profit warnings, said gross margin fell 1.9 basis points to 47.4%, mainly due to higher input costs as well as negative currency effects and increased clearance activities in Russia.

Group revenues, however, were up 6% to EUR4.12bn in the quarter, from EUR3.88bn in 2013, driven by a double-digit sales increase in retail and high-single-digit revenue growth in wholesale.

All regions, except North America, contributed to the growth, which was down 1% as mid-single-digit sales growth at Adidas was more than offset by declines at TaylorMade-adidas Golf and Reebok.

Western Europe increased 10%, mainly as a result of strong sales increases in Germany, France, Spain and the UK, while Greater China sales grew 13%.

Sales at the group's TaylorMade-Adidas Golf division fell 34% in the third quarter. In September, Adidas revealed plans to close stores in Russia and restructure the golf unit in a bid to drive growth and profitability following another profit warning.

For the full year, Adidas reaffirmed its outlook of a mid- to high-single-digit sales increase, boosted by the 2014 FIFA World Cup. Gross margin is forecast to decrease to a level between 48% and 48.5%, while net income is expected at around EUR650m, or EUR3.10 per share, from EUR839m in 2013.

Hainer said: "We will use 2015 to prepare the ground for our next strategic plan, where we will take the powerful capabilities we have built over Route 2015 and apply them with more vigour and intent to unlock the potential of our brands. We will present our vision for the future in March 2015."

Adidas shares rallied last month on reports that an investor group, including Jynwel Capital and funds affiliated with the Abu Dhabi Government, is launching a bid to buy Reebok from Adidas for around US$2.2bn.