Adidas slashes projected earnings by a third as profits drop to a 5-year low
The world’s second-biggest sportswear manufacturer Adidas saw its biggest slump in half a decade with profits dropping 11 per cent due to unrest in Eastern Europe, further blighted by a lower demand for Taylormade golf products.
Adidas acquired Taylormade in 1997
The German-based company issued a profit warning today decreasing projected annual net income to 650m euros (£514.7m) from an earlier estimate of 930m euros (£736.4m) in a move which has seen the group’s shares drop eight per cent.
While overall sales increased by two per cent in the second quarter, there was a decrease in revenue caused by Russian market sensitivity which will see stores close due to “current tensions in the region".
Additionally, an 18 per cent decline in demand for Taylormade golf products will see Adidas reduce its golf inventory in the coming months “to align the organisation’s overhead to match lower expectations".
The brand said it will step up marketing and point-of-sale investments over the next 18 months to secure and drive faster growth rates and market share gains in the developed markets such as North America and Western Europe.
Adidas chief executive Herbert Hainer said: “Everything we announced today has one objective: to strengthen our brands, to drive consumer desire, and to set our group up for long-term success. As we gear up for our next five-year strategic plan, we will assert ourselves much more aggressively in the marketplace.
“While we have delivered notable achievements, we also accept that we have not executed to our high standards at all times or provided enough flexibility to react in adverse market conditions. This we now tackle head on.”
He added: “The strength of our winning performance at the 2014 FIFA World Cup shows exactly what we are capable of when we execute flawlessly.”
This comes after the firm made a record-breaking sponsorship deal worth £70m a year with Manchester United.