Adidas scraps 2013 goals as wet golf season weighs
German sports apparel maker Adidas warned on 2013 profit on Thursday, saying adverse currency effects, a distribution problem in Russia and poor trading at its golf business meant targets were no longer attainable.
The group, second behind market leader Nike in the $245 billion global sportswear market, had already lowered its 2013 sales target last month after weak European trading and unfavorable currency movements hit second-quarter results.
The weakening of currencies in Russia, Japan, Brazil, Argentina and Turkey would impact turnover by a high single digit percentage in the third quarter, after taking 4 percentage points off sales in the second quarter, the group said in an unexpected statement late on Thursday.
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Compounding the effect of a weak rouble in Russia, its third largest market, the group had not been able to supply as many clothes and shoes as it had planned, it said, after problems switching to a new distribution center near Moscow.
In addition, a weak golf market, where wet weather this year has kept players from the greens, will result in lower than expected sales and profit for TaylorMade-Adidas Golf.
For 2013, Adidas now expects sales to rise by a low single digit percentage, against previous expectations for a low-mid single digit gain.
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It now sees net income of between 820 million euros and 850 million euros ($1.11-$1.15 billion), compared with a previous target for 890-920 million, and an operating margin of around 8.5 percent, down from near 9 percent.
In a note published earlier on Thursday, JP Morgan analysts had revised downwards their forecasts for Adidas' 2013 results, predicting a drop in sales to 14.63 billion euros, from last year's record level of 14.883 billion, due to tough third quarter trading conditions and currency effects.
"We believe overall the third quarter has not seen a meaningful pick up of trends so far as Europe continues to face the difficult comparatives set by the Olympics last year and overall a challenging macro environment," they wrote.
A spokesman for Adidas said weakness in Europe was not a determining factor in the profit warning.
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The problems in Russia would be resolved at the start of the fourth quarter, Adidas said, adding it expected a better final quarter thanks to demand for products for next year's soccer World Cup in Brazil and new launches.
In the statement, Chief Executive Herbert Hainer said the group remained "confident" for its 2015 goals, when it is hoping to achieve sales of 17 billion euros and an operating margin of 11 percent.
Adidas shares closed up 1.4 percent at 82.58 euros. They hit an all-time high of 88.50 euros at the start of August.
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