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SBD Global/November 8, 2013/Finance

Adidas Projects $2.7B Boost From 2014 World Cup Will Help It Compete With Nike

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Adidas' new brightly colored Samba cleat collection went on sale Wednesday.
Adidas forecast a $2.7B boost to sales from the 2014 World Cup that "would help it over a tough 2013," and said that it would "fend off rival Nike in hotly-contested European markets with innovative running gear," according to Victoria Bryan of REUTERS. Adidas "has struggled this year to maintain momentum after a big boost " from the 2012 London Olympics and Euro 2012. The company reported on Thursday that third-quarter operating profit dropped 6% and sales fell 7%, "hurt by distribution problems in Russia, a currency hit in North America and Japan, and poor sales of golfing products." Adidas also "lost market share to Nike on its European home turf." Adidas CEO Herbert Hainer "denied a recent report" that Nike had overtaken adidas in terms of football sales in Germany and "vowed to defend the group's prize business." Hainer: "We have a lot of ammunition to fight back" (REUTERS, 11/7). In N.Y., Nicky Redl reported net profit fell 8% from a year earlier to €316.4M ($427M) from €344M. Sales decreased 7% to €3.88B ($5.2B). Both figures "were in line with analysts' expectations." Hainer said, "Our third-quarter performance was negatively impacted by severe currency headwinds, unexpected short-term distribution constraints in Russia (and the former eastern bloc), as well as our actions to rebalance our inventories in the global golf market." It was a "further setback against Nike." Nike's revenue from continuous operations in the first quarter, which ended Aug. 31, rose 8% on the year while after-tax profit from continued operations rose 33%. In recent years, adidas "has managed to narrow the gap with Nike through product introductions and acquisitions." But a stronger euro, "which reduces the value of sales made in dollars and other currencies, has cut into earnings outside struggling Western Europe" (WALL STREET JOURNAL, 11/7).

FOOTBALL FOCUS: BLOOMBERG's Julie Cruz reported federation jerseys including Germany, Spain and Argentina "will be released next week and the match ball in December." A Samba range of "brightly colored footwear" to be worn this weekend by players including Barcelona’s Lionel Messi and Real Madrid’s Gareth Bale went on sale Wednesday. The CEO has forecast that football sales will rise to a record €2B ($2.7B) next year. DZ Bank AG analyst Herbert Sturm said the gross profit margin was “surprisingly good.” Sturm: “Third-quarter numbers showed no more negative surprises. We expect a series of positive newsflow in the next months.” In addition to the initial boost to football sales from World Cup merchandise, Hainer said he expects a “solid” fourth quarter for the company’s TaylorMade-Adidas golf business. A "weak golf market" was one of the reasons given by adidas for reducing its '13 profit forecast in September (BLOOMBERG, 11/7).
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