PARIS — Adidas ended a tough 2014 on a negative note, posting a loss in the year’s final quarter. Yet the German activewear giant is in a combative mood, wanting to take on America in 2015, where it’s been outplayed by rivals Nike and Under Armour.
“We want and we need to win in that market. It’s our competitors’ home turf, and we have not been spending enough here. We will invest more into advertising and young athletes, and we will grow again in 2015,” said the firm’s chief executive officer Herbert Hainer, declaring the region his key priority for the year.
Discussing the brand’s financial results for the full year on a conference call with journalists on Thursday, the ceo was overtly optimistic about the company’s future, predicting net income from continuing operations to grow at a rate of 7 to 10 percent in 2015.
Related Articles
He said “the Adidas group is and will remain a growth company. In 2015, we will see sales increases across all our brands, despite tough comparison with the 2014 World Cup year as well as the geopolitical crisis in Ukraine.”
You May Also Like
Adidas shares closed up 3 percent on Thursday.
RELATED CONTENT: WWD Earnings Tracker >>
The sporting goods firm’s loss in the fourth quarter amounted to 139 million euros, or $173.6 million, due to goodwill impairment losses of 79 million euros, or $101.9 million, and discontinued operations related to the planned Rockport divestiture, as the company is refocusing on sports as its core activity — much like next-door neighbor Puma.
All dollar rates are calculated at average exchange rates for the period concerned.
Sales advanced 6 percent in the fourth quarter to 3.6 billion euros, or $4.5 billion, driven by a strong performance in all geographies with the exception of North America, where sales slipped 4 percent, mostly strained by double-digit declines in the golf category.
For the full year, net profit stood at 496 million euros, or $659 million, down 37 percent, though double-digit sales increases at Adidas and Reebok drove total sales up 2 percent, or 6 percent in currency-neutral terms, to 14.5 billion euros, or $19.3 billion.
“While I am as disappointed as you are that we did not reach all our financial goals set out at the beginning of last year, there were many bright spots in our performance throughout 2014,” contended Hainer.
He pointed to the group’s core brand Adidas, which set a new sales record of 11.8 billion euros, or $14.3 billion; he singled out the soccer business with its record of 2.1 billion euros, or $2.5 million, in sales, and said Reebok advanced for the seventh consecutive quarter.
At the same time, he acknowledged that “2014 was a year with ups and downs,” identifying three key weaknesses: the ailing golf-market, where TaylorMade Adidas-Golf is a global leader; depressed consumer sentiments in Russia and currency headwinds.
While the golf category is expected to return to profitability in 2015, following measures to clean inventory and lower the cost base, in Russia, “the political and macro-economic situation caused us to be victims of our own success,” Hainer lamented, adding: “While we grew our business by almost 20 percent in local currency in 2014, we lost all of it in currency translation.”
The group is now banking on the upcoming 2018 FIFA World Cup to boost sales and defend its pole position in the region, which it holds ahead of Nike and with Reebok as “a strong number 3.”
Currency movements negatively impacted the brand’s top-line result by more than 550 million euros, or $731 million, in 2014.
Hainer, whose contract expires in March 2017, is to present a new strategic business plan at the end of this month.