Russia: a major construction area for Adidas.

“Route 2015” still a long way off: Adidas Group issues profit warning

Russia: a major construction area for Adidas.

Russia: a major construction area for Adidas.

Adidas has announced major adjustments as far as plans for future growth in terms of sales and profits are concerned. The group dismisses the projection of high single-figure sales increases for the current financial year and now expects its increase in turnover to be in the mid to high single-figures. Projected earnings were reduced to €650 million after the German company had expected profits of between €830 and 930 million. Management admitted that the group is not on track for its business plan called “Route 2015” whose targets will be met later than expected.

Sales went up by 2 percent (in reported euros) to €3,465 million during the second quarter which ended on June 30th. In constant currencies, total turnover was however up by 10 percent. The driving force behind this growth was in part Reebok’s good performance (up 9 percent) and soccer world champions Adidas (+14 percent). On the other hand, the golfing business continues to be challenging: TaylorMade-Adidas Golf fell by 18 percent. More detailed figures will be presented on Aug. 7th when all figures will be released for the first half of 2014.

The Three Stripes has issues with golf and Russia

Adidas has ongoing problems in various sectors which will have an impact on the group’s figures for the full financial years of 2014 and 2015. Aside from the challenging golf market, its management sites the Russian market and other former Soviet republics as problematic.

The latest political developments in Russia and its neighboring countries are expected to have a substantial negative impact on the evolution of the Russian ruble and the consumers’ mood in those countries. As a result, the group intends to reduce the number of new shops in the region and to accelerate the closing of existing outlets to ensure profitability.

All that we announce today serves one objective: to strengthen our brands, to enhance the desirability of our products and to make the group fit for long-term success.”

Herbert Hainer, CEO, Adidas Group

Encouraged by the progression of both Adidas and Reebok on a global scale, the company wants to up its marketing efforts and point of sale strategies, notably in the mature markets of North America and western Europe. The executive board has hinted that it will implement a new operational structure concerning global brands and global sales which will become effective very soon.

 

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