Adidas Profit Tops Forecasts as Shoemaker Seeks to Stem Woes

By Aaron Ricadela

Photographer: Jason Alden/Bloomberg

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Adidas AG (ADS) reported third-quarter profit that beat analysts’ already reduced estimates, providing some relief for Chief Executive Officer Herbert Hainer as tries to turn the company around in his last two years at the helm.
Net income fell 11 percent from a year ago to 282 million euros ($353 million), the Herzogenaurach, Germany-based sporting-goods maker said in a statement today, compared with the average 268.4 million-euro estimate of analysts surveyed by Bloomberg. Sales rose 6.2 percent to 4.1 billion euros, beating analysts’ 4 billion-euro estimate.
Adidas shares rose as much as 5.3 percent in early Frankfurt trading, trimming their plunge this year. Hainer is under pressure to turn the company around after earlier this year scrapping sales and profit targets for 2015 and abandoning the 2014 earnings goal as well. Nike Inc. (NKE) is taking share in the U.S. and encroaching on Adidas’s home turf in Europe, while the
market for golf equipment is slumping.
Adidas shares were up 5.2 percent at 59.71 euros at 9:08 a.m. in Frankfurt. They had dropped 39 percent this year through yesterday, making them the worst-performing member of the 30-stock DAX Index.
The company made strides in soccer and running sales, helping offset plummeting revenue in its golf business, beset by waning interest in the sport and the remainder of high-priced gear in stores. Golf sales fell 36 percent in the quarter on a currency-neutral basis.

Reduced Forecasts

“We have been aggressively addressing our key challenges: restructuring and stabilizing TaylorMade-adidas golf, adjusting our business in Russia/CIS and intensifying our efforts to revive momentum and growth in the U.S.,” Hainer said in the statement.
Sales next year are forecast to increase at a mid-single-digit rate, while net income will grow at a higher rate than group sales, the company said. Hainer will present a new strategic plan in March.
The company has reduced its forecast for net income this year, predicting about 650 million euros, compared with the 830 million euros to 930 million euros it previously anticipated. It also ditched its target for sales of 17 billion euros next year and an operating margin of 11 percent of revenue.
Hainer is facing investor discontent and is preparing next spring to articulate a strategy through 2020 that the 60-year-old CEO’s successor can pick up. Hainer’s contract as chief executive expires in 2017.
On Oct. 1, Adidas said it plans to buy back as much as 1.5 billion euros of its stock over the next three years.
Nike in September reported a 23 percent surge in quarterly net income, getting a boost from this summer’s soccer World Cup and 18 percent sales growth in China. American sports gear maker Under Armour Inc. (UA) has also put Adidas in its crosshairs.