Adidas slips in Europe as Stan Smiths, Superstars go out of fashion

Adidas cut its 2018 revenue forecast on Wednesday after third quarter sales fell in western Europe, where it was hit by changing fashions and Nike’s gains in soccer.

While the German sportswear firm has been taking market share in North America, its U.S. rival has been powering ahead in Europe, helped by a strong showing by Nike-sponsored teams at the soccer World Cup and its Phantom range launch.

Adidas shares, which have gained 12 percent in the last year, were down 2.3 percent by 0954 GMT after it cut its 2018 target for currency-neutral sales growth to between 8 to 9 percent from “around 10 percent”.

Chief Executive Kasper Rorsted has focused on improving profitability at Adidas since he took over in 2016, by focusing on growing in North America and Asia and pushing ecommerce, where margins are higher than in stores.

Adidas said it now expects 2018 net income from continuing operations to grow 16 to 20 percent, compared with previous guidance of 13 to 17 percent.

After an earlier warning that western European sale were likely to be flat in the second half, Adidas said the region’s currency-adjusted sales fell 1 percent in the third quarter.
Rorsted said Adidas had relied too much on shoes like its retro Stan Smith and Superstar that have fallen out of fashion, and not enough on sports performance gear.
“We are a sports company. We should have done a better job in the sports channel,” he told journalists.

NOT FAST ENOUGH

Adidas had also failed to react quickly enough to demand for its new styles like Continental shoes, and had overpriced some goods, all factors it is now addressing, Rorsted added.

Adidas continued to grow fast elsewhere, with sales up 16 percent in North America and by 15 percent in Asia-Pacific.

Ecommerce sales jumped 76 percent in the quarter and Adidas saw the September launch of Yeezy Boost shoes designed by rapper Kanye West drive traffic to its website, with sales and margins of the new styles above its expectations.

Overall, Adidas said its third-quarter sales rose by a currency-adjusted 8 percent to 5.873 billion euros (£5.13 billion), shy of analysts’ average forecasts, while net profit from continuing operations jumped 19 percent to 656 million euros, beating consensus.

German rival Puma raised its outlook for full-year sales and operating profit last month as it reported strong sales growth in the Americas and Asia and said its first basketball shoe in 20 years had been well received.