adidas Posts Big Drop In Q2 Profit, But Beats Expectations

Hainer To Assume Direct Responsibility For adidas' Global Sales As Part Of Restructuring

adidas today reported net income of $13M, or $0.06 per share, in Q2, down from $116M or $0.56 per share in '08, falling "less than analysts estimated," according to Holger Elfes of BLOOMBERG NEWS. The company also reported total revenue in Q2 declined 3% to $3.54B, and adidas Chair & CEO Herbert Hainer said that he now will "assume direct responsibility for global sales." adidas said that it is "splitting executive responsibility for sales and branding, with the latter function now headed" by adidas Brand President & CEO Erich Stamminger, to "strengthen brand management." The company repeated its forecast that revenue in '09 will "fall at a 'low-to-mid single-digit' pace, excluding currency moves." Elfes notes "discounting and weak currencies in eastern Europe have eroded the company's performance versus last year, when sales reached a record in the second quarter" due to the Beijing Olympics and soccer's UEFA European Championships. Earnings per share for the first six months of '09 fell 93% to $0.10, "meeting the company's own forecast that they will be 'around breakeven.'" adidas said that "profit on that basis will become 'significantly positive' again in the second half as input costs moderate" and the 2010 FIFA World Cup "fuels sales growth" (BLOOMBERG NEWS, 8/5).

TAKING A CLOSER LOOK: adidas said that "sales grew in the US and in Latin America, but fell in most major European and Asian markets." The company also indicated that "profit margins were squeezed due to higher operating costs and an increasingly competitive retail environment." Sales for the TaylorMade-adidas Golf brand increased during Q2 (BBC.co.uk, 8/5). However, the company's Reebok brand posted an operating loss for Q2 of $73.4M. Hainer said, "I am confident that our results will improve as we go through the remainder of the year. I believe we have seen the bottom in our financial performance this year." Meanwhile, REUTERS' Eva Kuehnen reports adidas is looking to save more than $143.9M in '10 by "cutting 1,000 of its almost 39,000 staff this year and by closing regional offices and potentially some of its stores" (REUTERS, 8/5). As part of the restructuring of management responsibilities, adidas' Exec BOD will consist of Hainer, Stamminger, Head of Global Operations Glenn Bennett and CFO Robin Stalker. In addition, TaylorMade-adidas Golf President Mark King and Rockport President Michael Rupp will continue to report directly to Hainer (adidas).