German Sports-Gear Maker’s Sales, Profit Fell in Third Quarter
Germany’s Adidas AG ADDYY 1.19% said Thursday it posted lower sales and earnings in the third quarter, losing traction against its main competitor, Nike Inc. NKE 0.62%
The world’s second-largest sporting-gear and equipment maker said results were down because of the strong euro, among other factors, but it predicted positive feedback for coming collections and said the effect of the 2014 World Cup in Brazil should boost demand.
Net profit fell 8% from a year earlier to €316.4 million ($427 million) from €344 million. Sales decreased 7% to €3.88 billion. Both figures were in line with analysts’ expectations.
“Our third-quarter performance was negatively impacted by severe currency headwinds, unexpected short-term distribution constraints in Russia (and the former eastern bloc), as well as our actions to rebalance our inventories in the global golf market,” Chief Executive Officer Herbert Hainer said.
The company also faced a tough comparison with the year-earlier period, when the London Olympics bolstered results.
The quarterly results signaled a further setback against its U.S. rival Nike, the No. 1 sporting-goods maker by sales, which has continued to increase revenue in most regions, apart from China and Japan.
Nike’s revenue from continuous operations in the first quarter, which ended Aug. 31, rose 8% on the year while after-tax profit from continued operations rose 33%.
In recent years, Adidas has managed to narrow the gap with Nike through product introductions and acquisitions. But a stronger euro, which reduces the value of sales made in dollars and other currencies, has cut into earnings outside struggling Western Europe.
Especially on Nike’s home turf, Adidas hasn’t caught up. The German company’s sales in North America were down 5% on a currency-neutral basis, largely because a challenging golf market hurt sales at TaylorMade-Adidas Golf.
Nike, meanwhile, posted a 9% increase in North American sales in its most recent quarter.
Adidas, including its Reebok brand, now ranks third in the U.S. running market, estimated to be worth $6.6 billion. It has less than 11% of that market, behind Asics Corp. , at more than 12%, and Nike, at 54%, according to Matt Powell, an analyst for SportsOneSource. Nike also has more than 50% of the $15 billion global running market, where Adidas is No. 2.
Adidas nevertheless sounded an upbeat note Thursday, pinning its hopes on new products and enthusiastic soccer fans ahead of next year’s World Cup.
“Momentum will clearly return to our business in the fourth quarter and beyond,” Mr. Hainer said.
Analysts also said bad news should be largely out of the way for Adidas. DZ Bank analyst Herbert Sturm said the new figures packed no negative surprises.
Adidas confirmed its full-year outlook, which it lowered in September. At the time, it cut its net profit forecast to between €820 million and €850 million, compared with an earlier forecast of €890 million to €920 million.
This article was published by The Wall Street Journal on