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UPDATE 3-Adidas cuts sales outlook on weak Europe and currency moves
August 8, 2013 / 6:26 AM / 4 years ago

UPDATE 3-Adidas cuts sales outlook on weak Europe and currency moves

* Q2 sales 3.38 bln eur vs Rtrs poll avg 3.44 bln

* Q2 opg profit 252 mln vs poll avg 261

* Now sees 2013 sales up by low-mid single percentage

* Maintains 2013 EPS forecast, 2015 sales target

* Shares drop over 3 pct at open, later pare losses

By Victoria Bryan

FRANKFURT, Aug 8 (Reuters) - German sporting goods firm Adidas cut its sales forecast for 2013 after weak European trading and adverse currency movements took their toll in the second quarter.

The world’s second largest maker of sportswear and goods after Nike said it now expected group sales to rise by a low to mid single-digit percentage in 2013, compared with previous guidance for a mid single-digit rate.

However it said it was sticking to its profit targets and earnings per share (EPS) guidance for the year.

After rival Puma also reported results hit by the weak Japanese yen and poor European sales, the Adidas sales target reduction did not necessarily come as a major surprise to investors.

“However, market estimates for Adidas are high, and the market has been spoilt in the past because Adidas normally doesn’t just meet targets, but exceeds them,” Metzler analyst Sebastian Frericks told Reuters.

Analysts said it was important, though, that Adidas had maintained its forecasts for an operating margin of near 9 percent in 2013 and for EPS to rise by 12-16 percent to 4.25-4.40 euros.

“The fact that the group is able to maintain its EPS guidance in spite of the macro issues in Europe, the unfavourable forex movements, and higher-than-expected selling, general and administrative costs, demonstrates that the rest of the business is doing much better than expected,” HSBC analyst Antoine Belge wrote in a note.

Shares in Adidas, which hit an all-time high of 86.87 euros this week, dropped by more than 3 percent at the open and were down 0.8 percent at 1034 GMT against a 0.4 percent gain for the Dax index of leading German shares.

For the second quarter Adidas reported sales of 3.38 billion euros ($4.5 billion), down a greater-than-expected 4 percent, and operating profit of 252 million, compared with expectations for 261 million.

2015 TARGETS

The wet start to the year also hurt its golf business, as rain kept players from the greens. Sales for the division dropped 8 percent in the quarter.

On a currency-neutral basis - with the effects of currency movements stripped out - group sales would have remained stable at around 3.5 billion euros.

Adidas CFO Robin Stalker said while the group had taken hits from currency movements in Brazil, the United States and Russia, it was the weakening yen in Japan that was the most significant . Japan is Adidas’s fourth largest market globally.

Chief Executive Herbert Hainer said the current headwinds were not affecting its group forecast for 2015, and that it was still aiming for sales in that year of 17 billion euros.

Sales in western Europe fell 11 percent in the second quarter, on a currency-neutral basis. Last year, Adidas benefited from the sale of products related to the European soccer championships and the London Olympics.

Hainer said the group was seeing signs of improvement in western Europe, and hoped to achieve a turnaround in the second half, with demand for products building ahead of the 2014 soccer World Cup in Brazil.

The company’s Reebok brand, for which Adidas cut its 2015 sales target last year after poor results, returned to growth in the quarter with sales increasing 11 percent on a currency-neutral basis.

Hainer said the brand should see currency-neutral sales growth in 2013.

“The third quarter is the most important for Reebok because of the back-to-school season in the United States, so I wouldn’t call it a turnaround yet,” said Metzler analyst Frericks. “They need to repeat the good performance in the third quarter.”

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