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World Cup, new products to speed Adidas sales growth
November 9, 2017 / 7:10 AM / a month ago

World Cup, new products to speed Adidas sales growth

BERLIN (Reuters) - Adidas (ADSGn.DE) hopes the launch of new team kits before next year’s soccer World Cup will restore sales growth after the German sportswear firm reported a slowdown in Europe in the last three months.

FILE PHOTO: Germany's national team unveil their new jerseys, ahead of the upcoming international friendly matches against England and France, in Berlin, Germany, November 7, 2017. REUTERS/Fabrizio Bensch/File Photo

Adidas is making shirts for teams including World Cup holders Germany and Spain. It is lifting marketing spending and expects a sales acceleration in the Christmas shopping season, Chief Executive Kasper Rorsted told journalists.

Third-quarter sales rose 9 percent to 5.677 billion euros ($6.59 billion), missing average analyst expectations for 5.86 billion euros. Growth slowed in Europe even as the German firm powers ahead in China and North America.

Rorsted said the lower growth in Europe was largely due to a general slowdown in the market, while the termination of sponsorship deals with the U.S. National Basketball Association (NBA) and Premier League champions Chelsea led to an overall decline in basketball and soccer sales.

The World Cup, to be played in Russia in June and July 2018, will allow companies such as Adidas, Nike (NKE.N) and Puma (PUMG.DE) to market soccer kits and boots to a global audience.

STICKING TO FORECASTS

Adidas shares, which are up more than a third this year, were down 2.6 percent by 1110 GMT to their lowest level in almost four months, making them the second biggest decliner on Germany’s blue chip index .GDAX.

Some investors had predicted that Adidas might lift its forecasts for 2017 after smaller German brand Puma last month increased its targets for the year.

But Adidas, which had already raised its 2017 outlook in July and lifted its long-term forecast in March, confirmed it expects 2017 currency-neutral sales to rise between 17 and 19 percent and net income to increase at between 26 and 28 percent.

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“While implied fourth-quarter growth of 20-30 percent looks challenging, profitability targets look well underpinned,” said Citi analyst Dan Homan, who rates Adidas shares “neutral”.

Inventories from continuing operations rose a currency-neutral 16 percent in the third quarter, which finance chief Harm Ohlmeyer said was an indicator of expected growth.

Quarterly net profit jumped more than a third to 526 million euros, beating analyst consensus for 512 million euros, as the popularity of the Adidas brand meant it could keep prices up, helping offset higher input costs and currency fluctuations.

    NORTH AMERICA TURNAROUND

    Adidas and Puma have been gaining market share in North America as customers snap up their retro styles and lifestyle shoes instead of basketball and sports performance gear, hurting Nike and Under Armour (UAA.N).

    Sales of the Adidas and Reebok brands rose 28 percent in greater China and 23 percent in North America, after stripping out currency effects, but by just 7 percent in western Europe.

    Rorsted expects the struggling Reebok fitness brand to return to growth in the U.S. market next year, saying the firm’s commitment to turn the business around is underlined by a new deal to partner with designer Victoria Beckham.

    Sales fell 17 percent in Russia, which Adidas blamed on the “ongoing challenging consumer sentiment” and store closures.

    Rorsted said he did not expect the weakness of the Russian economy to dent sales of merchandise compared to previous World Cups as most replica shirts are bought by fans at home.

    ($1 = 0.8618 euros)

    Reporting by Emma Thomasson; Editing by Victoria Bryan and Keith Weir

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