NEW YORK — While Adidas AG beat earnings expectations in the third quarter, the next two quarters are looking more challenging.
In a call with analysts last Thursday, company CEO Herbert Hainer said the fourth quarter will see difficult year-over-year comparisons against high-margin, event-related products from the Olympic and Paralympic Games and the UEFA 2012, as well as negative impacts on Reebok from the NFL license termination.
He added, “The player lockout in the NHL will negatively affect our first-quarter results. And we will see the last of the Reebok India negatives as we finalize our cleanup efforts.”
But momentum in the Adidas brand remains intact. Hainer noted, “We have a full pipeline of game-changing product innovation and fresh brand activation that will shake up the market.”
While maintaining its profit guidance for the full year, Adidas lowered sales expectations to a high-single-digit percentage growth, currency-neutral. Income should still come in between 15 percent and 17 percent higher, to reach a range of 770 million euros to 785 million euros, or $931.4 million to $1 billion, depending on exchange rates.
Analysts warn that the Reebok brand and southern Europe remain challenging points for the firm.
Christopher Svezia, analyst at Susquehanna Financial, said, “Trends have slowed somewhat in southern Europe given difficult macro conditions, though we still believe the Adidas brand is taking share from most competitors, particularly weaker brands. We do expect to see progress in 2013, when the product pipeline reaccelerates.”
Adidas brand sales grew 10 percent currency-neutral in the third quarter, said Hainer, who attributed some of the success to high visibility at global sporting events.
In North America, the brand grew 11 percent. Adidas America President Patrik Nilsson said in a statement, “Consumers continue to drive demand for our innovative products. We had one of our strongest back-to-school seasons, with our Originals business up nearly 40 percent during that time. We also saw great results in our basketball business, with sales up nearly 60 percent thanks to Rose, AdiZero Crazy Light 2 and our NBA partnership.”
Reebok, however, is a different story, declining 25 percent currency-neutral in the third quarter and 20 percent year-to-date.
“We do see encouraging signs for the brand, particularly in markets led by our own retail and controlled-space initiatives,” said Hainer. “Our Classics business is moving into a sustainable upward trend, [having increased] double digits in the third quarter, supported by strong new product introductions such as those with new brand ambassador Alicia Keys.”
For the third quarter, Adidas’ net income improved 14 percent to 344 million euros, or $438.2 million at current exchange, while earnings per share came in at 1.64 euros, or $2.09.
Total revenue advanced 4 percent on a currency-neutral basis, driven by double-digit sales increases in retail.