November 6, 2019 / 7:29 AM / 12 days ago

Adidas sees soccer boost after stumble on Kanye West shoes

BERLIN (Reuters) - German sportswear company Adidas (ADSGn.DE) expects a boost to sales from new soccer merchandise ahead of the 2020 European championships after quarterly growth was held back by a weaker performance from Yeezy shoes designed by Kanye West.

Third-quarter sales rose a currency-adjusted 6% to 6.41 billion euros ($7.10 billion), beating analysts’ mean forecast of 6.32 billion euros, although footwear sales were up just 1% measured against a major Yeezy launch last year.

That also reined in ecommerce growth to 14% from 37% in the second quarter as many of the Yeezy shoes were sold online.

Adidas decided to limit supplies of Yeezy products this year to maintain their exclusivity, Chief Executive Kasper Rorsted told journalists.

Shares in Adidas, which have risen by more than a third in the last year, were down 2.9% at 1046 GMT.

Adidas has eroded Nike’s (NKE.N) dominance of the U.S. market in recent years, helped by partnerships with celebrities like Kanye West, but Nike has been growing faster in China and Europe, a trend that continued in the latest results.

Nike reported sales rose a currency-neutral 10% for the quarter ended Aug. 31, with sales in China up 27%, though 4% growth in North America missed expectations.

Adidas’s sales growth slowed to 11% in China in July-September from 14% in the second quarter, but accelerated in North America to 10% as the company fixed supply chain problems that had dented growth earlier in the year.

However, higher air freight costs to speed products to North America to counter difficulties meeting demand for mid-market clothing weighed on profitability, with quarterly operating profit flat at 897 million euros.

The supply chain issues should only have a minimal impact on the fourth quarter, Rorsted said, adding he expected a significant acceleration in the period, when Adidas is set to launch its first products in a partnership with singer Beyonce.

Slideshow (2 Images)

The fourth quarter will get support from products for the European soccer championships like the official replica ball, along with an earlier Chinese New Year and the opening of a new flagship store in London, where sales have been encouraging.

“We are very confident about how the last two months of the year will unfold,” Rorsted said.

Rorsted confirmed he expects 2019 net income from continuing operations of between 1.88 billion and 1.95 billion euros and said he now sees currency-neutral sales growth coming in at around 6.5%, the midpoint of the forecast range of 5-8%.

Reporting by Emma Thomasson; Editing by Michelle Martin and Mark Potter

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