Adidas shares plunge 13% after Russia warning
Adidas shares tanked more than 13 percent on Thursday after the sportswear brand slashed its profit targets for 2014, warning "tensions" in Russia and poor golf sales would hit its bottom line.
The company-which sponsored this year's soccer World Cup winner Germany-- cut its net income forecast for 2014 to 650 million euros ($870 million) from the 830-930 million-euro range euros originally predicted.
Adidas said it was scaling back its Russia expansion by reducing store openings and increasing store closures, as it struggles with the hit from the weak Russian rouble and the turmoil engulfing Russia and neighboring Ukraine.
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"The recent trend change in the Russian rouble, as well as increasing risks to consumer sentiment and consumer spending from current tensions in the region, point to higher risks to the short-term profitability contribution from Russia," the German company said in a statement.
It said 2015 targets would also no longer be achievable, and will provide a further update on August 7 when it reports its half year results.
Golf sales below par, World cup 'win'
Sales at Adidas' TaylorMade golf business-which accounts for nearly 9 percent of group sales--tumbled 18 percent on a currency-neutral basis. Adidas blamed the "slow liquidation of old inventory" at TaylorMade, adding that it would look to restructure the golf arm to "align the organisation's overhead to match lower expectations for the golf industry's development".
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But the company's chief executive said its soccer brand had done well after the World Cup in Brazil. "The strength of our winning performance at the 2014 FIFA World Cup shows exactly what we are capable of when we execute flawlessly," Herbert Hainer, CEO of Adidas, said in a statement.
Nike pressure
Analysts said that concerns over Russia as well as the golf business were not the only challenges facing Adidas. The company is also under intense pressure from American rival Nike.
"Adidas has been doing dreadfully," Rahul Sharma, managing director at Neev Capital, told CNBC in a phone interview.
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"The scale of Nike is building up so much and with the way Nike is spending on marketing, Adidas can't keep up. Nike is gaining more scale and these companies are losing sales."
The fierce competition has already been seen as Adidas sign a record-breaking £75 million ($127 million)-a-year deal to make Manchester United's kit for 10 years, trumping Nike's previous £23.5 million-a-year agreement.
Adidas also said it was stepping up its marketing in developed markets following its success during the World Cup.
- By CNBC's Arjun Kharpal
