Adidas chief admits mistakes have taken toll

December 3, 2013 1:29 pm

Adidas chief admits mistakes have taken toll

By Alice Ross in Frankfurt

The chief executive of Adidas has admitted that the German sports equipment company has made mistakes and not performed as well as senior executives had hoped. Speaking to investors at its Bavarian headquarters in Herzogenaurach, Herbert Hainer, head of the world’s second-largest sportswear company by sales, said that the environment “had served up a constant stream of challenges”, including cost pressures, currency swings and a “persistently weaker” European market.Adidas issued a profit warning in September after sharp falls in emerging market currencies along with weakness in the US golf market and problems with a delivery plant in Russia.

After three years, we are not where we thought we would be in terms of the numbers

– Herbert Hainer, chief executive

Shares in Adidas, which have lagged behind those of its biggest rival Nike this year, fell just over 1 per cent to €88.24 in afternoon trading.

The company is midway through a five-year plan with the aim of increasing sales to €17bn and achieving an operating profit margin of 11 per cent by 2015.

“After three years, we are not where we thought we would be in terms of the numbers,” said Mr Hainer on Tuesday. “And to be fair and frank, we have also made a few mistakes.”

Net sales in the first nine months of the year were just over €11bn at Adidas, down from €11.5bn in the same period of 2012. The company expects to achieve an operating margin of 8.5 per cent this year, down from a previous forecast of 9 per cent.

The chief executive also said that Adidas had suffered “bad luck” with injuries among some of the top athletes it sponsors – such as basketball star Derrick Rose, who was injured last month and is expected to be out of action in the coming weeks.

Offering guidance for 2014, Mr Hainer said the company expected to improve its operating margin by about 1 per cent and increase revenues “at a high single-digit rate” in currency neutral terms.

The company is also hoping that the football World Cup in Brazil next summer will boost sales.

Adidas has been concentrating on expanding in the US, China and Russia as part of its strategy to target sales growth. The company sees the US as a particular battleground for market share, where it lags behind arch rival Nike in sales.

Adidas is also trying to gain a larger share of the Chinese market, where consumers are visiting gyms more. China has also been the most successful market for the company’s new Neo brand aimed at teenagers, where Adidas is targeting €1bn in sales by 2015.

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 (, 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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