SBD/November 7, 2013/Finance

Adidas' Q3 Operating Profit, Sales Drop, But Hainer Hopeful Company Will Rebound In '14

Hainer expects next year's World Cup will help adidas bounce back
adidas today said that Q3 operating profit dropped 6% and sales fell 7%, "hit by distribution problems in Russia, currency effects and poor sales of golfing products," according to Victoria Bryan of REUTERS. Results during Q3 last year were "boosted by the Olympics and the European soccer championships," but adidas has "struggled to maintain momentum." adidas Chair & CEO Herbert Hainer said that the '14 FIFA World Cup in Brazil and "positive feedback for its upcoming collections meant growth would return." Hainer in a statement said, "We have dealt swiftly and decisively with our challenges in the third quarter, to ensure we return to growth. Momentum will clearly return to our business in the fourth quarter and beyond." Despite the "fall in sales and operating profit, the group managed to improve its gross profit margin" by 1.9% to 49.3% in Q3 as it "pushed through higher prices and made more sales in its own shops." A "bright spot" for adidas this year has been Reebok, which saw sales rise 5% in Q3, marking the "second quarter in a row of growth as a renewed focus on fitness pays off" (REUTERS, 11/7).

LOOKING FORWARD
: The WALL STREET JOURNAL's Boston & Germano noted adidas yesterday "unveiled its new 'Samba Pack' line of soccer cleats." The company "can expect a boost from the sales of such exclusive products, which it sells under license as one of the World Cup's global sponsors." But that "may not be enough to stay alone out front in the global soccer market anymore," as Nike has "been quietly building heft in the field that Adidas once dominated." adidas Senior VP/Global Football Markus Baumann said, "Nike is definitely making some steps forward." Soccer is "only a part" of adidas' broader business, "but a big part of how it is perceived by consumers." Signs that Nike is "powering past Adidas in its core soccer business could raise questions about Adidas's ability to deliver on its promise to get back on track for strong growth in 2014, which is based in part on a bounce from the World Cup." adidas is "betting that it can crack Nike's hold" on the $6.6B U.S. running market and has "vowed to overtake Nike on its home turf within five years." SportsOneSource analyst Matt Powell said that this is a "tall order considering that Adidas, including its Reebok brand, now ranks third in U.S. running with less than 11% of the market, behind Asics Corp. at more than 12% and Nike at a whopping 54%." adidas has "made some inroads in other markets," but soccer still is the "game that Adidas must win, because investors expect it" (WSJ.com, 11/6).
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