Exchange rates scupper Adidas turnover

Exchange rates scupper Adidas turnover

German shoe brand Adidas is placing its hopes on 2014, which should be a successful year thanks to the World Championship Football in Brazil. 2013 has been a rather abysmal year, as the euro proved to be (too) strong.

Beaten quarterly expectations

In an “exceptionally strong fourth quarterAdidas managed a 42 million euro profit, beating analyst expectations of 37.1 million euro. Its turnover also charged ahead 3.3 % to 3.48 billion euro, whereas analysts had expected a ‘mere’ 3.41 billion euro.

 

Excluding exchange rates fluctuations, turnover would even have increased 12 %, with Adidas up 10 %, Reebok up 9 % and the other retail activities up 3 % (on a like-for-like basis). It is exactly these retail activities that the group wishes to strengthen in order to compete with eternal competitor Nike.

 

It has been a difficult 2013 financially for Adidas, with the devaluated Russian ruble, Japanese yen, Brazilian real and Turkish lira resulting in a turnover warning in September. The strong euro pushed the yearly turnover down 2.6 % to 14.5 billion euro: excluding exchange rate fluctuations, turnover would have increased 3 %.

 

WC football has to bring profit growth

These continuous exchange rate issues explain why the German group remains cautious for 2014, despite the World Cup Football for which it created the official ball (the Brazuca) and several national team shirts.

 

Adidas believes an 830 to 930 million euro profitis possible, barely more than the 839 million from 2013 and well below analysts’ expectations at 1 billion euro. CEO Herbert Hainer, whose contract was prolonged until 2017, remains upbeat: “From an operational perspective, there is no doubt that 2014 will be a successful year for us.”

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