Adidas AG, the worlds second-largest sports gear manufacturer, made an official statement that it will launch a massive marketing campaign in order to stop market share losses as decreasing golf equipment demand and an increase in production costs prompted the company to reduce its 2014 profitability forecast.
Mr. Herbert Hainer, who is the Chief Executive Officer of the company, said in the statement, which was cited by the Wall Street Journal: “It is with disappointment that after such a great summer of sport, I have to report that our group hasnt been able to meet…high expectations.” He added: “We take full responsibility to rectify our shortfalls swiftly.”
Adidas AG shared in its statement that it projects its operating profit this year to be 6.5% to 7% of sales, compared to 8.5% to 9% of sales that it predicted earlier. The operating margin, a closely watched indicator by analysts, fell to 7.5% of of revenue from 9.7% over the same period a year ago.
The investors of the company saw a 16% fall in Adidas second-quarter net profit. The companys shares also collapsed this week after the warning that Adidas AG would miss its profit targets for 2015 due to harsh market conditions.
The Germany-based company has blamed the poor economic conditions, as well as the decreasing demand for its products in Russia for its weak performance over the second fiscal quarter. In addition, it explained that its second-quarter results were affected by increased marketing expenses and negative impact of volatile currencies on its earnings.
As reported by the Financial Times, the companys Chief Executive Officer Mr. Hainer shared: “Missing our goals is something we take very seriously as a management team and we definitely reflect critically on. We clearly recognise that part of this underperformance is due to our executional mistakes.”
Adidas AG were losing 4.27% to trade at 55.61 euros per share by 13:02 GMT, marking a one year change of -35.17%. According to the information published on the Financial Times, the 33 analysts offering 12-month price targets for Adidas AG have a median target of 69.00 euros, with a high estimate of 108.00 euros and a low estimate of 50.00 euros. The median estimate represents a 18.78% increase from the last price of 58.09 euros.