SBD/July 31, 2014/Finance

Adidas Lowers Projections For FY '14, Postpones FY '15 Targets After Q2 Drop

adidas pointed to increased marketing costs stemming from the '14 World Cup
Shares in adidas "tumbled" today after the FIFA Global Partner cut its '14 outlook and postponed '15 targets, "citing risks surrounding Russia and challenges at its golf business," according to Monica Houston-Waesch of the WALL STREET JOURNAL. adidas' Q2 profit fell to $192.7M (all figures U.S.) from the $230.2M reported a year earlier, while sales "rose 2%" to $4.6B. The company "cut its forecast for net profit" in '14 to around $864M from a previous forecast of $1.1-1.2B. adidas also said that increased marketing costs "stemming from" the '14 World Cup "offset underlying growth for the Adidas and Reebok brands in the quarter, and that it will continue to invest in further growth." The brand "will target developed markets in North America and Western Europe" in particular (WSJ.com, 7/31).

IN THE ROUGH: adidas said that it was "abandoning the sales goals outline in its ambitious 'Route 2015' sales initiative" announced in November '10. In Portland, Allan Brettman notes the company had "set a goal" of roughly $23B by the end of '15. Given that there has "been little relief in the currency markets, the significantly lower contribution projected from TaylorMade-adidas Golf as well as higher investments in marketing, the Group's Route 2015 targets are no longer achievable in the timeframe." This will "be discussed in further detail as part of the adidas Group's half year financial results" on August 7. adidas' statement about TaylorMade "underscored the decline of the golf industry" (Portland OREGONIAN, 7/31). adidas said that it "has decided to 'significantly reduce' its store opening plan in [Russia] for this year and next, and to increase the number of store closures" (AP, 7/31).
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