Adidas AG, the worlds second-largest sporting-goods maker, reported that first-quarter net profit declined and missed analysts estimates due to currency effects and double-digit revenue decline at its TaylorMade-Adidas Golf business.
The Herzogenaurach, Germany-based clothing company announced that net profit fell by 34% to 204 million euros in the first three months of the financial year, compared to analysts estimates ranging between 217 and 220 million euros. Sales slid 6% to 3.53 billion euros, trailing the average estimate of 3.61 billion euros according to analysts surveyed by Bloomberg.
Adidas attributed the worse-than-expected performance to the strength of the euro against its counterparts in Asia and Latin Americas emerging markets, as well as a slowdown in its golf business. Sales at TaylorMade-Adidas Golf fell by 38% due to increased discounting, launches of new products, as well as changes in the timing of key shipments. TaylorMade accounted for 7.5% of Adidas first-quarter sales.
Herbert Hainer, Chief Executive Officer of Adidas-Group said, cited by the Wall Street Journal: “Strong performances particularly in the emerging markets and in our own retail were masked by strategic changes to how we go to market at TaylorMade-Adidas Golf as well as adverse currency effects.”
Moreover, sales declined at most of the companys divisions as customers halted purchasing ahead of the FIFA World Cup. However, the company reiterated its previously defined annual sales and profit targets based on expectations the World Cup in Brazil this summer will boost sales.
Mr. Hainer said the company is preparing for its “largest football offensive ever”. He added, cited by Bloomberg: “I expect a strong second quarter to point the way forward to a sustained period of growth and momentum.”
Adidas expects a net profit of between 830 million and 930 million euros in 2014 and earnings per share in the range of 3.97 euros and 4.45 euros. Group sales are projected to increase at a high single-digit rate. The company said it will reorganize product releases and shipping schedules at TaylorMade.
Adidas AG fell by 0.26% to 76.64 euros per share by 8:29 GMT in Frankfurt, marking a one-year change of -9.67%. The sporting-goods maker is valued at 16.14 billion euros. According to the Financial Times, the 33 analysts offering 12 month price targets for adidas AG have a median target of 92.00 euros, with a high estimate of 109.10 euros and a low estimate of 68.00 euros. The median estimate represents a 19.73% increase from the previous close of 76.84 euros.
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