Adidas Issues Profit Warning As Golf Sales Plunge, Russia Outlook Worsens

Adidas AG executive board announced important strategic decisions that have been taken to secure and drive growth and profitability as well as address recent developments. As these decisions will impact the Group’s financial results, management is also updating 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.

• Firstly, poor retail sentiment and the slow liquidation of old inventory in the golf category across the globe will lead to a significantly more challenging top-line and margin development for TaylorMade-Adidas Golf than originally expected in the second half of 2014. To ensure the successful execution of our strategy to drive long-term margin improvements in the golf category, we will take further measures to reduce inventory in the marketplace in the second half of 2014. In addition, we will also begin a restructuring program at TaylorMade-Adidas Golf to align the organisation’s overhead to match lower expectations for the golf industry’s development.
• Secondly, the recent trend change in the Russian rouble as well as increasing risks to consumer sentiment and consumer spending from current tensions in the region point to higher risks to the short-term profitability contribution from Russia/CIS. As a result, 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. These steps are aimed to reduce risk and protect profit as well as to drive a faster implementation of new inventory management principles for that market. Nevertheless, Management remains very encouraged by increasing brand momentum for both Adidas and Reebok as a result of local marketing investments as well as improving store operations.
• Thirdly, following the strong performance at the 2014 FIFA World Cup , and improving momentum at brand Adidas and Reebok, Management has decided 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. This is underpinned by a strong product pipeline in key performance categories as we further leverage our award-winning Boost technology as well as new product and collaboration initiatives in lifestyle.
• Finally, to drive faster decision making and more effective and efficient consumer focused strategies and execution in the marketplace, Management has completed an in-depth review of the Global Brands and Global Sales structures under the direction of recently appointed Executive Board members Eric Liedtke and Roland Auschel. This new organisational structure will take effect on Aug. 1, 2014.