Adidas cannot escape currency effects

On a currency-neutral basis, figures for the first half of 2014 and the second quarter are not so bad, but exchange rates weigh heavily on the company’s results in euros. In its second quarter, the group managed to boost global sales by 10 percent with double-digit growth in Germany, the U.K., Spain and Italy, which led to a 13 percent sales increase. China contributed an increase of 11 percent, the emerging markets in Europe ( including Russia and the Community of Independent States (CIS)),14 percent, and Latin America, 33 percent. North America, on the other hand only rose by 1 percent.

When looking at the increase in constant currencies for the first six months however, the picture is less rosy. But all regions with the exception of North America were up compared with the first half of 2013. In reported euros, Adidas posted a drop in sales, as is highlighted in the graph below.


 

H1 2014

H1 2013

change       in €

change in constant currencies

 

in Mio. €

in Mio. €

in %

in %

Western Europe

2.017

1.907

6

6

European emerging markets

938

901

4

21

North America

1.471

1.716

-14

-10

China

806

781

3

8

Other Asian markets

986

1.064

-7

0

Latin America

781

765

2

25

Total)

6.998

7.134

-2

5

Overall, the Adidas Group booked a drop in sales in euros of 2 percent to €6,998 million. Turnover was up by 5 percent on a currency-neutral basis.

By categories and brands, the second quarter was stronger than the entire first half, partly because of the performance of the Adidas brand in the lead up to the soccer world cup in Brazil. Currency-neutral growth of Adidas was 14 percent in the second quarter, Reebok was up by 9 percent, but the golf division of TaylorMade-Adidas Golf (TMAG) plummeted 18 percent, which in part explains last week’s profit warning.

 

 

1. Half 2014

1. Half 2013

Change       in €

Change in constant currencies

 

in Mio. €

in Mio. €

in %

in %

Wholesale

4.442

4.495

-1

5

Retail

1.752

1.589

10

22

Other businesses

804

1.050

-23

-19

Total

6.998

7.134

-2

5

The gross margin dropped by 0.9 percentage points to 49.2 percent in the second quarter, mainly due to lower margins in the golf category and in retail. The same figure was reached for the half year, down by 1 percentage point from last year’s period. The operating margin slipped by 2.2 percentage points to 7.5 percent in the first six months. Expenses for sales and marketing rose by 7 percent to €945 million, mainly due to the company’s efforts surrounding the soccer world cup. Pre-tax profits fell by 25 percent to €495 million.

 

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