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Volume 6 No. 212


Adidas shareholders saw a 16% "slide in net profits in the second quarter of the year as the group repeated its warning that currency effects, conditions in Russia and poor golf sales were taking their toll," according to Alice Ross of the FINANCIAL TIMES. Adidas CEO Herbert Hainer said, "Missing our goals is something we take very seriously as a management team and we definitely reflect critically on. We clearly recognize that part of this underperformance is due to our executional mistakes." While overall net sales rose 2.4% between April and June from the same period last year to €3.5B, the group "was less profitable," with operating profit dipping 12.7% to €220M. Adjusted for currency effects, sales were up 10%. The group said its adidas brand in particular "had benefited from the World Cup in Brazil," with sales up 14% on a currency neutral basis in the second quarter and 6.5% in real terms. Sales "rose across all geographical markets on a currency neutral basis" (FT, 8/7). REUTERS' Emma Thomasson reported adidas "had already flagged plans to increase marketing spending last week when it cut sales and net income targets" for '14 and scrapped its goals for '15. Citi analysts, who rate the stock "neutral," said that "they remained sceptical, given the planned reduction of stores in Russia, higher marketing costs and adverse currency trends." They wrote in a note, "We continue to fear that earnings growth trends could remain muted despite the recently lowered EBIT (earnings before interest and taxation) base." Hainer said that adidas, which runs more than 1,000 stores in Russia, "now aims to add only 80 this year, down from a planned 150, with a similar number expected for 2015 due to higher risks to consumer sentiment and spending over the Ukraine crisis." That move, as well as more discounting of stock in Russia, "would trim" about €50M ($67M) from operating profit in the second half. A "planned restructuring of the golf unit" would mean a hit of €50M-€60M ($67M-$80M) (REUTERS, 8/7). In N.Y., Monica Houston-Waesch reported adidas "will provide specifics on the campaign, slated to start in the first half of 2015, early next year." Analysts expect "to have more clarity then on which costs are exceptional and which are recurring." Berenberg analyst John Guy said, "It is one thing to invest successfully in your brands, its another to buy growth. We are positive on brand investment so long as the returns look sensible" (WALL STREET JOURNAL, 8/7).

Scottish Championship side Rangers has been forced to "try to raise cash from shareholders to fend off financial woes caused by the fans' boycott," according to Keith McLeod of the Scotland DAILY RECORD. The club announced plans to raise £4M ($6.7M) on the London Stock Exchange on Wednesday, "well in advance of their planned AGM later this year," when they hoped to sell 43.4 million shares to raise around £13M ($22M). Rangers' cashflow has been hit by supporters "refusing to buy season tickets in protest at the Ibrox board." It is thought "only slightly more than 20,000 have been sold for this season's Championship campaign -- compared with 38,000 last season in League One." The club said in an announcement that it wanted to raise £3.96M in sale that will not "require a prospectus to be issued." Football business analyst Neil Patey said, "If you try to raise a great amount right now, that would involve a full prospectus. That would take time and you would have a public document out there and everyone trawling over the stuff and second-guessing it." It is "understood there is concern about the City's appetite for investing in Rangers, with Scottish football struggling to generate meaningful cash returns" (DAILY RECORD, 8/7).

FRESH DOUBT: In London, Mark Walker reported Rangers' future was "plunged into fresh doubt." The club had warned back in April in its business review that it would "look to exercise their right to issue shares if sales of season tickets were 'materially less than anticipated.'" Rangers also announced that a total of 43.4 million shares were "available to be released to existing shareholders, but stressed there was no guarantee they would all be sold" (LONDON TIMES, 8/7). The BBC's Chris McLaughlin reported prior to the "announcement of a scaled down share issue, potential city investors were being asked to buy in at around 25p per share -- the current price is around 30p a share." The presentation document, aimed at "selling a stake in Rangers, highlights plans for the club to be financially sustainable" by the end of the '15-16 season through "restructuring the business in a strategic three-year plan" (BBC, 8/6). In Glasgow, Gary Keown reported former Rangers Chair Alastair Johnston "has branded the size of the crowd at Rangers' Petrofac Training Cup win over Hibernian as a 'warning sign.'" He insisted it is "too early to make predictions about attendances despite the fact only 18,318 people" attended Rangers' first home game of the season. Johnston, however, sees a "clear need for the SPFL Championship club to pay closer attention to their fanbase as they push ahead with plans to plug funding gaps with another share issue destined to be worth far less" than the £10M ($17M) they had hoped for. Johnston: "I am always wary to make predictions about summer when you see one swallow fly" (HERALD SCOTLAND, 8/7).

'NOT ENOUGH': In Glasgow, Greig Cameron reported Rangers' Union of Fans "described it as another ¬≠example of the short-term thinking which is hampering the club." The Union of Fans' Chris Graham said, "We know that £4M is not enough to do anything substantial to improve the club. It is literally just money to keep the lights on and I'm not even convinced it keeps the lights on much beyond Christmas. There doesn't appear to be any long-term plan" (EVENING TIMES, 8/7).