Adidas, the world’s second biggest sportswear firm, has announced that weakening emerging market currencies would have a negative impact on 2014 results and even pose risk to its 2015 targets despite an expected sales boost from the World Cup.
The sportswear brand has been losing ground to the market leader, Nike.
It makes around half of its sales from fast-growing emerging markets where the currencies have been sliding in the recent months, with the Russian rouble and political uncertainty in the region creating a considerable risk for the company.
The poor sales report reflects on the brand’s decision to cut its marketing costs in 2013 in the absence of a major event. Its campaigns such as the sponsorship of Barcelona FBC star Lionel Messi did not appear to lift demand.
Revenue has fallen 6% year-on-year to €3.8bn for the 12 months to December across Western Europe. It did show signs of a slight recovery towards the end of the year when revenue rose across the region by 1.9% in the three months to December.
“The currency situation, as it is right now, represents a significant risk to the achievement of our goals,” chief executive Herbert Hainer told a press conference.
“We cannot ignore the significant weakness of the Russian rouble since the beginning of the year as well as the current uncertainty in the region, both of which have added considerable risk to our results in euros.”
Addidas has set its targets to reach €17bn in sales by the end of 2015 and achieve an operating margin of 11% but Hainer admitted back in December that this plan wasn’t going as well as expected.
The group said it was pleased, however, with its fourth-quarter sales which rose 3% to €3.5bn despite the strong euro.
Sales were up by 12% on a currency neutral basis and the company repeated its prediction that sales would grow at a high single-digit rate but advised that the currency effects in 2014 would still have a severe effect on the business.
Laura Bracher, London
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