Adidas profits warning cites EM currencies

September 19, 2013 10:21 pm

Adidas profits warning cites EM currencies

By Alice Ross

Adidas, the world’s second largest sportswear group by sales, issued a profit warning last night blaming the slump in emerging market currencies for lower than expected projected sales for the year. Investors in the German company should brace themselves for income payouts up to 11 per cent lower than previously forecast, the group said, as it lowered its net income projection for shareholders to €820m-€850m for 2013, down from an estimate of €890m-€920m.Adidas, which owns 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 €14.9bn, adjusted for currency movements.

The group also said that its new distribution facility in Chekov, near Moscow, was experiencing difficulties that were 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.

Adidas will release its results for the third quarter on November 7.

Herbert Hainer, Adidas chief executive, said 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”.

Revenues at Adidas in the first half of the year fell 3 per cent 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 per cent of the group’s sales costs.

But the analysts still expected Adidas shares to hit a fresh record high next year with a target of €95.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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