Adidas Lowers FY Outlook Again

Adidas Lowers FY Outlook Again

Adidas Group lowered its guidance for the year due to a further weakening of several currencies, a distribution problem in Russia and ongoing softness in golf. The company, which owns Adidas, Reebok and TaylorMade, now expects a low-single-digit currency-neutral sales increase for the full year, down from its previous range calling for a low- to mid-single digit increase.

Net income attributable to shareholders is now projected to increase at a mid-single-digit rate to a level of €820 million to €850 million (previously: €890 million to €920 million). A significant portion of the negative impact will be in the third quarter and management continues to expect a strong rebound in sales and profitability growth in the fourth quarter. Adidas Group’s nine months financial results will be released on Nov. 7, 2013.

The company had already lowered its sales outlook in early August.

The earnings update came following Adidas’ Executive Board meeting and was due to “recent negative market developments.”

“Firstly, the further weakening of several currencies versus the euro throughout August and September such as the Russian rouble, Japanese yen, Brazilian real, Argentine peso, Turkish lira and Australian dollar have intensified the negative currency translation headwinds already highlighted by management during the course of the year,” the board said in a statement. “This is estimated to lead to a high-single-digit percentage point negative translation impact in the third quarter. Secondly, an unexpected short-term distribution constraint as a result of the transition to the adidas Group’s new distribution facility in Chekhov, close to Moscow, is impacting the quantity of new product flow to stores. While the problem is expected to be resolved at the beginning of the fourth quarter, this, together with the weakness of the Russian rouble, means that the Group’s 2013 goals for Russia/CIS are no longer attainable. Finally, the continued softness in the global golf market and TaylorMade-Adidas Golf’s focus on maintaining healthy inventory levels in the marketplace will lead to a lower sales and profit contribution from the segment than originally forecasted.”

Herbert Hainer, Adidas Group CEO, “Despite the increased headwinds we are facing in the short term, we remain confident and resolute in pursuit of our Route 2015 strategic aspirations. Based on the strong demand for our highlight concepts and innovations in our key categories, the upcoming initiatives for the FIFA World Cup 2014 and positive customer feedback to our spring/summer 2014 collections both at Adidas and Reebok, momentum will clearly return to our business in the fourth quarter and beyond.”

On Aug. 8 in reporting second-quarter results, Adidas slightly trimmed its 2013 revenue forecast because of “lackluster” sales in Europe and a wide range of deteriorating currencies against the Euro. Prior to that date, the company had predicted sales growth in the medium single-digit rate. However it said it was sticking to its profit targets and EPS guidance for the year, slightly raising its gross margin projections.