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Adidas profit falls despite strong World Cup

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Adidas profit is down 16 per cent for the second quarter of the year, forcing the sportswear company to admit it will fail to reach business targets for the year.
 
The German brand says it has taken a hit from poor North American sales, a struggling golf brand and Russia’s continuing conflict with Ukraine. 
 
After operating margin fell from 9.7 per cent in the first quarter of 2014 to 7.5 per cent in the second, Adidas is now targeting between 6.5 and 7.0 per cent for 2014, a drop from 8.7 per cent last year. A target of 11 per cent operating margin by the end of 2015 has been scrapped.
 
Net sales are also down five per cent on this time last year from €7.1bn (£5.6bn) to €6.9bn.
 
Adidas chief executive Herbert Hainer said that the company will now focus on “key categories and markets” for the remainder of the year.
 
A successful World Cup for the company – it sponsored both finalists and claimed to have sold 8m replica World Cup shirts – has been unable to make up for poor performance elsewhere.
 
Hainer said:
 
It is with disappointment that after such a great summer of sport, I have to report that our Group has not been able to meet the high expectations we laid out in our Route 2015 agenda.
 
We take full responsibility to rectify our shortfalls swiftly.
 
For the remainder of 2014, our priority is to sustain the momentum we have in key categories and markets, and take corrective steps to bring more stability to our future earnings.
 
Shares in Adidas tumbled last week after the company admitted that the Ukraine crisis was having a negative impact on business.

It is now scaling back its operations in Russia where it currently has 100 stores. 2013 sales in the country totalled €1bn, while eastern European countries are responsible for around 13 per cent of sales for the company.
 
First half sales in North America, where Adidas has struggled to compete with market leader Nike, have dropped 14 per cent. 
 
A 22 per cent fall in sales for TaylorMade, the company’s golf brand, has also taken its toll.