Adidas "reported disappointing first-quarter results on Tuesday due to a big drop in sales at its TaylorMade golf business, but said a stronger second quarter was signalling a return to growth," according to Emma Thomasson of REUTERS.
The world's second-biggest sportswear firm, which has been losing ground in its home territory to Nike, said that operating profit "fell almost a third" to €303M ($422M), missing average analyst forecasts for €318M ($443M).
It said that €80M of the decline "was due to a poor quarter at TaylorMade due to a change in shipping cycles and a declining U.S. golfing market," and €50M from "negative currency movements -- particularly the recent drop in the Russian rouble."
But CEO Herbert Hainer said that those factors "masked strong performances in emerging markets and the company's own retail network," which saw currency-neutral sales jump 22%, and confirmed the group's guidance for a "high single-digit" increase in currency-neutral sales in '14.
Hainer said, "While we still have to be wary of currencies and their effects on our financials, the first quarter will be the low point of our performance. I expect a strong second quarter to point the way forward." Ingo Speich, a fund manager with Union Investment, which has a 0.89% stake in adidas and is its 10th biggest investor, said that "he could not understand why the board decided in March" to extend the contract of Hainer-- in the job since '01 -- until '17. Stefan-Guenter Bauknecht, fund manager at Deutsche Asset & Wealth Management, adidas' sixth-biggest shareholder with a 1.45% stake, said that "he was prepared to give Hainer more time" (REUTERS, 5/6). BLOOMBERG's Aaron Ricadela reported the decline "showed the company has more to be concerned about than just selling goods" to football fans at the World Cup. Deutsche Bank analyst Michael Kuhn said in a note to clients, "A 35 percent earnings-per-share decline in a quarter which should have benefited at least a little bit from the upcoming World Cup is disappointing." With the World Cup set to start next month, adidas "maintained sales and profit forecasts for this year." It is next year that is "concerning analysts." The company has forecast sales of €17B ($23.7B): analysts expect only €15.9B ($22.1B), according to the average of 26 analysts compiled by Bloomberg. Bankhaus Lampe analyst Michael Gorny said in a research note written in April, "We consider the company’s targets for 2015 to be very ambitious." He added that he does not "expect the company to meet the goals before 2016." Adidas "has also forecast an operating profit margin" of 11% in '15. Hainer said that adidas "plans to start its biggest soccer 'offensive' later this month as the World Cup nears." He said that the global tournament, which starts June 12 in Brazil, "will lead to better results starting in the second quarter" (BLOOMBERG, 5/6).
