By Ellen Emmerentze Jervell
FRANKFURT-- Adidas AG on Thursday reported a significantly wider
fourth-quarter loss, capping a tough year for the embattled German
sportswear group.
The company said its net loss for the three months to the end of
December came in at EUR140 million, compared with a loss of EUR10
million for same period the year before.
Adidas blamed the loss on higher input costs, negative currency
effects and goodwill impairment losses of EUR78 million, largely
related to the deterioration of the Russian ruble. It also
registered a EUR82 million loss related to the sale of its Rockport
unit. The company's fourth-quarter sales rose 6.5% to GBP3.6
billion.
"I am as disappointed as you are that we did not reach all our
financial goals set out at the beginning of last year," Chief
Executive Herbert Hainer said on a call with reporter. But, he
said, "all in all, we are in much better shape today than we were
five years ago."
The company also said it would start the second tranche of its
share buyback program immediately.
Shares rose more than 4% in early trading as results met
expectations.
The world's No. 2 sports-gear maker, behind Nike Inc., has been
trying to turn around its once-booming business after suffering
major losses last year because of sliding sales at its golf
business and exposure to Russia.
In late July, it admitted it wouldn't be able to meet its
financial goals for 2015 and cut its net profit target for 2014
from a range of EUR830 million to EUR930 million to around EUR650
million. The company said in January it had met the target,
excluding charges related to Rockport and Russia.
Mr. Hainer is the longest-serving CEO of a German blue-chip
company, and despite having more than doubled group sales since
taking office, he is under increasing pressure from shareholders
after failing to achieve financial targets. Mr. Hainer is also
criticized for the company's loss of market share in North America
and for acquiring Reebok almost 10 years ago. Adidas last month
announced it had begun the search for Mr. Hainer's replacement.
Adidas bought Reebok in 2006 to boost U.S. sales but the
business proved to be a burden for its German parent. In October
last year, The Wall Street Journal reported that a consortium of
investors was looking to buy Reebok, prompting Adidas shares rise
as much as 8% the morning after. Adidas declined to comment on the
bid.
Adidas has in recent years tried to reinvent Reebok as a fitness
brand, and the unit is slowly showing signs of a recovery. In the
fourth quarter sales at both the Reebok and Adidas brands grew,
rising 1% and 11%, respectively, on a currency neutral basis. Sales
at its TaylorMade-adidas Golf division, which has recently hurt the
company's margins, fell 24%. Adidas said it expects its golf unit
to "significantly" improve in 2015.
The company's sales increased most in European emerging markets
and China.
However, exposure to Russia and the weak ruble ate into the
company's profit margin. The company grew business in the area by
almost 20% in local currencies, but lost all of it in currency
translation. Adidas has been reducing its net store opening plan,
controlling inventory levels and optimizing its cost base to secure
profitability levels in the rather "lackluster" environment, Adidas
said.
Sales in North America, the company's decadelong Achilles' heel,
remained weak, and declined 4% on a currency neutral basis.
"We underperformed in North America and we are all disappointed
when we look back over the last 12 months," Mr. Hainer said.
However, he added, "one thing is clear: We want and we need to win
in that market."
Adidas in April last year hired Mark King, an American who has
been with the group for almost three decades, to lead a turnaround
its North American business.
Mr. King in January told the Journal he planned shift focus to
American sports. He has begun a push to sign endorsement deals with
500 players from the Major League Baseball and National Football
League. Adidas also recently moved its global creative director to
the U.S. and hired three top designers from Nike as part of its
efforts to reboot in the competitive North American sporting goods
market. Adidas last fall fell behind Baltimore-based Under Armour
to the No. 3 spot in the U.S.
Even on its home turf, Adidas feels competitors breathing down
its back. Adidas reported a currency neutral sales increase of 13%
in Western Europe in its fourth quarter. In comparison, Nike's
revenues grew 22% in the region in the company's fiscal second
quarter, reported in December.
For the full year, Adidas reported a net profit of EUR490
million, down from EUR787 million last year, on a rise in sales to
EUR14.5 billion.
Looking ahead, Adidas said it expects to increase
currency-neutral sales at a mid-single-digit rate for 2015 and net
profit from continuing operations to increase at a rate of 7% to
10%. The company will launch its new five-year strategy by the end
of this month.
Write to Ellen Emmerentze Jervell at ellen.jervell@wsj.com
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