Adidas eyes Euro 2016 for sales boost
Adidas forecast 10% to 12% growth in both local-currency revenue and adjusted net income this year, pinning down its targets less than a month after raising its outlook. Gross margin will narrow as much as 1 percentage point due to higher purchasing costs in Asia, Adidas also said.
The buoyant sporting-goods market and ability to raise prices are helping Adidas surmount higher costs and provide incoming chief executive Kasper Rorsted with a stronger foundation than the company has had in years. Sales of trainers and clothing will be helped by the European championships in June and July, Adidas said.
“The sporting-goods outlook remains very healthy, and Adidas is well positioned to take advantage,” Piral Dadhania, an analyst at RBC Europe, said.
Outgoing CEO Herbert Hainer reiterated that Adidas will complete a review of its struggling golf business this month. Revenue of TaylorMade-Adidas Golf dropped 13% excluding currency shifts in 2015, declining to €902 million.
“We are considerably stronger and better today than we were 12 months ago,” Mr Hainer said at a press conference at the company’s head offices in Herzogenaurach in Germany.
The 61-year-old executive is resigning one year earlier than originally planned.
The stock has gained by around 9% this year, making it the best performer in Germany’s DAX Index. The company is raising its dividend 6.7% to €1.60 a share.
Mr Rorsted, who starts in October after Mr Hainer spent 15 years at the helm, will need to improve Adidas’s standing in the US, where it’s slipping further behind No. 1 trainer brand Nike, and increase growth in athletics shoes, which define its brand.
“The big hope is that he’s going to close the marketing gap with Nike,” said Berenberg analyst Zuzanna Pusz. Adidas’s fashion-oriented Originals and Neo lines are expanding sales faster than performance footwear, and Adidas needs to accelerate sport shoe sales to stay competitive, she said.
The company is spending more on sales and marketing this year. It’s also paying more to produce sneakers in Asia because of currency effects and labor costs, a problem that’s affecting the whole industry. Adidas said higher pricing will help offset that.
The company is also taking steps to deal with activist investors. Adidas has said it plans to give board seats to Nassef Sawiris, Egypt’s richest man, and a representative of Groupe Bruxelles Lambert, the investment firm backed by Albert Frere.
