Adidas Profits Rise Slightly in Q2, May Drop Golf Division

adidas-superstar
The Adidas Superstar 80s Primeknit.
Courtesy Image

Adidas Group’s profits saw a modest 1.4 percent rise in the second quarter bolstered by double-digit growth in Western Europe, Greater China and MEAA (Middle East, Africa, and Asia Pacific). Adidas brand and Reebok were also up on a reported basis; however, the struggling TaylorMade Golf unit continued its downward spiral.

Adidas CEO Herbert Hainer said the company’s golf division, which saw currency-neutral declines of 26 percent, was hit by an overall deterioration of the golf market as well as its own inability to resonate with golf consumers.

“The current performance has shown that we need to go much deeper in order to bring TaylorMade Adidas golf back on track, and we will make every effort to develop the right measures to drive the turnaround of our golf business,” Hainer said on the second-quarter conference call.

While the CEO maintained an optimistic outlook on the division as he laid out the major initiatives for turning business around, which included “pricing promotion enhancements,” he hinted at plans to shed the faltering division.

“We have engaged with an investment back for the purpose of analyzing future options for our golf business, in particular the Adams and Ashworth brands,” Hainer added.

Adidas’s sales in the North American market were up 21 percent on a reported basis but declined slightly, 0.5 percent, on a currency-neutral basis.

The company has also said it will ramp up its digital efforts, announcing  the acquisition of Austrian-based mobile fitness company Runtastic on Aug. 5, 2015.

Net Income: Net income grew 1.4 percent year-over-year to 146 million euros, or $161 million based on the average currency exchange rate for the period.

EPS: Earnings per diluted share were .72 euros, or 77 cents, an increase of 6 percent from the year-ago quarter.

Net Revenue: Net revenues rose 15 percent to 3.9 billion euros, or $4.3 billion based on the average currency exchange rate for the period.

Executive Insights: “Overall, there is no doubt that the Adidas brand and Reebok brand had an excellent second quarter. The strong Q2 performance is even more impressive considering the difficult comparison the Adidas brand faced due to the non-recurrence of very strong FIFA 2014 World Cup–related revenues generated in the second quarter of last year … [the] double-digit sales increase is witnessed in Western Europe and Greater China, and these two markets had already seen a double-digit growth rate in the prior-year period … Western Europe was a key improvement area for us 18 months ago. The second-quarter results now clearly show that our efforts in our home territory are paying off.” –Hainer on the Q2 conference call

Looking Ahead: Adidas maintained its guidance for the fiscal year.