Following poor environment Adidas revises 2015 targets

06 Aug '14

3 min read

At a recent meeting of the Adidas board, the Management revisited the targets set for 2015 and postponed delivery of those set targets. Adidas now also expects a mid-to-high single-digit currency-neutral sales increase for 2014.

This has come about following poor retail sentiment in global markets, slow liquidation of old inventory in the golf category, recent trend change witnessed in the Russian rouble and the ongoing tensions in the CIS region.

For the second quarter, the Management stated that the Group's top-line momentum materially improved as expected. 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 continued to play a significantly negative role, impacting top-line results by over seven percentage points in the quarter. As a result, sales in euro terms increased two percent to €3,465 billion. Operating profit in the second quarter stood at €220 million.

Net income attributable to shareholders for the quarter was € 144 million. Currency translation, less of 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.

Due to slow liquidation of old inventory in the golf category, Adidas will take further measures to reduce inventory in the marketplace in the second half of 2014. In addition, it will also begin a restructuring programme at TaylorMade-adidas Golf to align the organisation's overhead to match lower expectations for the golf industry's development.

The Management took into account 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, which point to higher risks to the short-term profitability contribution from Russia and CIS countries.

As a result, Adidas 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.

Following the strong performance at the 2014 FIFA World Cup and improving momentum at Adidas and Reebok, the Adidas Management 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 developed markets such as North America and Western Europe.

Finally, to drive faster decision making and execute more effective and efficient consumer-focused strategies and execution in the marketplace, the Management completed an in-depth review of its brands and sales structure and will implement a new organisational structure, which will take effect from August 1.

Fibre2fashion News Desk - India

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