Adidas Has Solid Q3, Plans To Cut Golf Jobs

Adidas Stan Smith Horween Leather pack
The low model of the Adidas Stan Smith Horween Leather pack.
Courtesy of Adidas

Adidas is ready for a comeback.

The Herzogenaurach, Germany-based company continued to forge ahead with its turnaround plans, improving its momentum in the third quarter and showing double-digit growth in profits and revenues.

Currency-neutral revenues at Reebok and the once-faltering TaylorMade-Adidas Golf gained 3 percent and 6 percent, respectively, while Adidas enjoyed double-digit sales growth in Western Europe, North America, Greater China, Latin America and in the Middle East, Asia and Africa (MEAA).

In Q2, after the golf division suffered currency-neutral revenue declines of 26 percent, Adidas CEO Herbert Hainer signaled that he was considering a divestiture. While a sale may be on the back burner for now, Adidas said it will cut its TaylorMade workforce by 14 percent by the end of the year.

“Our relentless focus on the consumer is clearly paying off: The great momentum that Adidas and Reebok are enjoying across the globe proves that our products and marketing are resonating extremely well with the target audience, both in the lifestyle and the performance arena,” Hainer said in a release. “The third quarter shows that, in combination with our excellence in execution, this is the game plan to drive brand desirability and generate strong top- and bottom-line growth.”

At press time, the company’s share price had climbed more than 8 percent.

Net Income: Net income grew 10.4 percent year-over-year, to 314 million euros, or $349 million, based on the average currency exchange rate for the period. (Net income from continuing operations grew 20 percent, to 337 million euros, or $374 million).

EPS: Earnings per diluted share were 1.67 euros, or $1.85, an increase of 26 percent from the year-ago quarter.

Net Revenue: Net revenues rose 17.7 percent, to 4.76 billion euros, or $5.28 billion based on the average currency exchange rate for the period. Currency-neutral revenues were up 13 percent.

Executive Insights: “Thanks to our outstanding performance during the first nine months, we are reaching the 2015 goal line much faster than we had anticipated. Like true champions, we will not rest on our laurels but will continue to build on our current strength to prepare ourselves for the next stage. The investments into our brands and a leaner golf organization will directly fuel next year’s top- and bottom-line performance and set us up for sustainable profitability improvements from 2016 onwards.”
— Hainer in a release

Looking Ahead: Adidas increased its guidance for the fiscal year. The company now expects currency-neutral sales to rise at a high-single-digit rate (previously a mid-single digit rate) in 2015. Sales growth will be driven by double-digit jumps in Western Europe, Greater China and MEAA, the company said. Latin America currency-neutral sales are now projected to rise at a high-single-digit rate (previously a mid-single-digit rate). Currency-neutral sales in North America are now expected to grow at a mid-single-digit rate (previously a low- to mid-single-digit rate). Sales at Reebok-CCM Hockey are now projected to grow at a high-single-digit rate (previously a mid-single-digit rate) on a currency-neutral basis.