Adidas concerned over 2013 profit, shares decline

adidasAdidas, the world’s second largest sportswear group by sales, issued a profit warning Thursday night blaming the slump in emerging market currencies for lower than expected projected sales for the year. Shares in the group logically fell 5% in response in early morning trading on Friday.

According to the German company investors should expect income payouts up to 11% lower than previously forecast, the group said, as it lowered its net income projection for shareholders to €820-€850 million for 2013, down from an estimate of €890-€920 million.

Adidas, owner of the Reebok brand, said the weakening of currencies including the Russian rouble, Brazilian real, Japanese yen, Turkish lira and Argentinian peso against the euro would have a significant impact on its profits.

After a board meeting on Thursday, Adidas said that it expected only a “low single digit” increase in sales during the year, down from guidance of low to mid-single digit increase. Sales in 2012 at the German company hit a record high of €14.9 billion, adjusted for currency movements.

Another difficulty the company is facing consists of a problem with distribution in a facility in Chekov, near Moscow which is constraining the flow of new products to Adidas stores. A slowdown in the golf market would also lead to lower sales and profits from Adidas’ golf division, the group said.

Herbert Hainer, Adidas chief executive, assured that despite the three factors affecting the third quarter the group remained “confident” it would meet its medium term goals and that “momentum will clearly return to our business in the fourth quarter and beyond”.

Companys revenues in the first half of the year lost 3% in euro terms from the same period in 2012, the group revealed in August, with falling sales in the UK, Italy and Spain helping to offset a growth in sales in Latin America and China. Revenues were flat during the period, however, adjusted for currency movements.

Analysts at Citigroup said in a note after the profit warning that Adidas remained at risk of a fall in global consumer spending triggered by any fresh economic downturn, as well as a rise in commodity prices, with raw materials accounting for 60% of the group’s sales costs.

Adidas is due to release its results for the third quarter on November 7.

The current consensus among 33 polled issued by Money CNN investment analysts is to buy stock in Adidas AG. This rating has held steady since September, when it was unchanged from a buy rating.

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