December 3, 2013 1:29 pm

Adidas chief admits mistakes have taken toll

Adidas AG sneakers are displayed ahead of a news conference at the company's offices in Herzogenaurach, Germany, on Wednesday, March 7 2012©Bloomberg

Rains in the US contributed to a 7 per cent sales fall

The chief executive of Adidas has admitted that the German sports equipment company has made mistakes and not performed as well as senior executives had hoped.

Speaking to investors at its Bavarian headquarters in Herzogenaurach, Herbert Hainer, head of the world’s second-largest sportswear company by sales, said that the environment “had served up a constant stream of challenges”, including cost pressures, currency swings and a “persistently weaker” European market.

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Adidas issued a profit warning in September after sharp falls in emerging market currencies along with weakness in the US golf market and problems with a delivery plant in Russia.

After three years, we are not where we thought we would be in terms of the numbers

- Herbert Hainer, chief executive

Shares in Adidas, which have lagged behind those of its biggest rival Nike this year, fell just over 1 per cent to €88.24 in afternoon trading.

The company is midway through a five-year plan with the aim of increasing sales to €17bn and achieving an operating profit margin of 11 per cent by 2015.

“After three years, we are not where we thought we would be in terms of the numbers,” said Mr Hainer on Tuesday. “And to be fair and frank, we have also made a few mistakes.”

Net sales in the first nine months of the year were just over €11bn at Adidas, down from €11.5bn in the same period of 2012. The company expects to achieve an operating margin of 8.5 per cent this year, down from a previous forecast of 9 per cent.

The chief executive also said that Adidas had suffered “bad luck” with injuries among some of the top athletes it sponsors – such as basketball star Derrick Rose, who was injured last month and is expected to be out of action in the coming weeks.

Offering guidance for 2014, Mr Hainer said the company expected to improve its operating margin by about 1 per cent and increase revenues “at a high single-digit rate” in currency neutral terms.

The company is also hoping that the football World Cup in Brazil next summer will boost sales.

Adidas has been concentrating on expanding in the US, China and Russia as part of its strategy to target sales growth. The company sees the US as a particular battleground for market share, where it lags behind arch rival Nike in sales.

Adidas is also trying to gain a larger share of the Chinese market, where consumers are visiting gyms more. China has also been the most successful market for the company’s new Neo brand aimed at teenagers, where Adidas is targeting €1bn in sales by 2015.

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