Adidas profits hit by fluctuation in Russian currency
Adidas group turnover increased six percent at constant exchange rates in the fourth quarter of 2014, in large part due to the growth in retailing of 20 through hundred, while the wholesale was more tempered five percent.
The German firm’s TaylorMade Golf brand has undergone a 28 percent decrease of sales.
North America, where nascent sports brand Under Armor steals market share, has seen a four percent decline in sales, while on its own ground, Western Europe grew 13 percent worn by the Adidas and Reebok brands.
This took the turnover of the year 2014 to 14.5 billion euros (10.5 billion pounds sterling), up six percentt over the previous year. However, the impact of currency fluctuations reduced this two percent growth.
The fall of the Russian ruble hit Adidas hard – it recorded a 78 million euros depreciation of its activities in the region.
Gross profits for the entire group fell 1% to 6.9 billion euros.
Why this is interesting
In the battle for major sportswear brands, Adidas has lost ground to its biggest rival Nike. Longtime CEO Herbert Hainer has finally succumbed to pressure from shareholders and the board now has a plan in place to appoint a successor.
His home side may have triumphed at the Adidas logo-emblazoned World Cup, but 2014 was not a big year for the German firm and shares fell to their lowest level in two years in August. He cut earnings expectations citing the effects of market turmoil in Europe and the fall of the Russian ruble.
The company revealed in January that it had sold its Rockport brand which it acquired as part of its 2005 Reebok takeover, grossing $ 250million (£ 167million) and allowing it to focus on its main sports brands.
He also signed a massive £ 750million sponsorship deal with Manchester United, ensuring their logo will appear on the Premier League team’s shirts for the next decade.
What adidas said
2014 was a year of ups and downs for the adidas group. But we resolutely rose to the challenges and achieved our adjusted revenue and profit targets, ”commented Herbert Hainer, CEO of the adidas group. “In the fourth quarter, we recorded double-digit growth in Western Europe, Greater China, European emerging markets and Latin America. This shows that the momentum at adidas and Reebok is fully intact.
And on its outlook for 2015, the company had this to say:
Adidas Group sales are expected to grow at an average single-digit rate on a currency neutral basis in 2015. Despite a high degree of uncertainty regarding the economic outlook and consumer spending in Russia / CIS, the positive sales development will be supported by growing consumer confidence in most geographies. In particular, the development of the group’s sales will be favorably impacted by a considerably improved sales development at TaylorMade-Adidas Golf as well as by the continued momentum of Adidas and Reebok. This, along with the continued expansion and improvement of controlled space initiatives, will more than make up for the one-time sales related to the 2014 FIFA World Cup. Currency conversion is expected to have a positive impact on the development of the group’s turnover in published terms, given the recent strengthening of major currencies such as the US dollar and Chinese renminbi against the euro.
As the final whistle sounded over a year, Adidas bosses and shareholders were likely happy it was all over, with more ups and downs than a Keepie Uppie tournament. The US market is grappling with its competitors, and Russia’s problems are expected to continue until 2015.