Nov 3, 2016
Adidas sales momentum slowed slightly in third quarter
Nov 3, 2016
German sportswear group Adidas said it would take one-off costs to restructure the Reebok brand and invest in its future growth as it reported sales momentum slowed slightly in the third quarter.
New boss Kasper Rorsted, who took over in October, is under pressure to keep up growth and improve profitability after Adidas shares soared two-thirds this year and it gained market share from Nike in the United States.
"For the first time in many quarters Adidas reported quarterly numbers that did not beat market expectations. This could cause some short term profit taking," said DZ Bank analyst Herbert Sturm, who rates the stock "hold".
Adidas had previously raised its 2016 outlook four times this year, helped by soaring demand for its Superstar fashion sneakers and Ultra Boost running shoes.
Adidas said it will take unspecified one-time costs due to measures aimed at strengthening future growth, as well as around 30 million euros ($33 million) for restructuring measures at struggling fitness brand Reebok.
Adidas CEO Rorsted declined to speculate about future of Reebok beyond restructuring measures, but did says 150 jobs in Boston would be cut due to reebok restructuring. Some 150 jobs would move elsewhere, he said.
The chief added that his company has the right strategy, but might need "fine-tuning."
Some investors have suggested that Rorsted should consider selling Reebok, which Adidas bought in 2005 to try to catch up with Nike in the U.S. market, but which has weighed on the group's profitability.
Third-quarter net profit rose 15 percent to 387 million euros on sales up 14 percent to 5.4 billion euros, compared with average analyst forecasts for 377 million and 5.4 billion respectively.
On a currency neutral basis, sales growth was at 17 percent, slowing from 21 percent in the second quarter.
Adidas reiterated a forecast it raised in July for 2016 currency-adjusted sales to grow at a rate in the high teens and for net profit from continuing operations to rise at a rate of between 35 and 39 percent.
Sales at the core Adidas brand rose 20 percent on a currency-neutral basis, compared with 7 percent for Reebok, and 6 percent for the TaylorMade golf business it is trying to sell.
Adidas continued its recovery in North America, with currency-neutral sales up 20 percent, though that was down from the 26 percent growth seen in the second quarter. Both Nike and Under Armour Inc have reported slowing sales in the region.
© Thomson Reuters 2023 All rights reserved.