Mixed results for Adidas as Western Europe a drag on sales
Adidas, the German sportswear giant, has reduced its revenue forecast for 2018 after sales failed to match expectations in the third quarter, with a notable slowdown in Western Europe, albeit profits are healthy.
Adidas today announced revenues of €5.87 billion ($6.75 billion) for July to September, an increase of 8 per cent year-on-year, but below analysts’ forecasts of €5.92 billion.
Net profit from continuing operations soared by 19 per cent to €656 million, beating forecasts of €619 million.
Adidas had already warned that western European sales were likely to be flat in the second half of the year, and currency-adjusted sales were down 1 per cent in the third quarter.
While acclaiming a “stellar quarter,” overall, chief executive Kasper Rorsted told CNBC that Europe is “more impacted than any other economy” by the influence of a lack of consumer confidence on spending, brought about in part by Brexit, the UK’s impending departure from the European Union.
Adidas is now predicting full-year currency-neutral sales growth of between 8 and 9 per cent, below the previous forecast of 10 per cent, and growth in net income from continuing operations of between 16 and 20 per cent, compared with an earlier projection of between 13 and 17 per cent.
While it has been eating into Nike’s market share in North America, Adidas has seen its power base in Europe eroded by its larger US rival.
Rorsted admitted that Adidas had been too dependent on established shoe brands such as Stan Smith and Superstar on the fashion side, at the expense of sports performance gear, telling journalists: “We are a sports company. We should have done a better job in the sports channel.”
The leading sportswear firms enjoyed significant exposure at this year’s Fifa World Cup, which culminated with France beating Croatia in an all-Nike final.
They can also boast big-money contracts with top European clubs, and it was reported this week that Real Madrid will rake in upwards of €1.1 billion ($1.25 billion) from a renewed kit deal with Adidas running from 2020 to 2030.