Last updated: September 20, 2013 8:50 am

Adidas shares fall on profit warning

A shopper walks past Adidas AG merchandise in Beijing©Nelson Ching

Adidas, the world’s second largest sportswear group by sales, issued a profit warning Thursday night blaming the slump in emerging market currencies for lower than expected projected sales for the year.

Shares in the group fell 5 per cent in response in early morning trading on Friday.

Investors in the German company should brace themselves for income payouts up to 11 per cent lower than previously forecast, the group said, as it lowered its net income projection for shareholders to €820m-€850m for 2013, down from an estimate of €890m-€920m.

Adidas, which owns the Reebok brand, said the weakening of currencies including the Russian rouble, Brazilian real, Japanese yen, Turkish lira and Argentinian peso against the euro would have a significant impact on its profits.

After a board meeting on Thursday, Adidas said that it expected only a “low single digit” increase in sales during the year, down from guidance of low to mid-single digit increase. Sales in 2012 at the German company hit a record high of €14.9bn, adjusted for currency movements.

The group also said that its new distribution facility in Chekov, near Moscow, was experiencing difficulties that were constraining the flow of new products to Adidas stores. A slowdown in the golf market would also lead to lower sales and profits from Adidas’ golf division, the group said.

Adidas will release its results for the third quarter on November 7.

Herbert Hainer, Adidas chief executive, said that despite the three factors affecting the third quarter the group remained “confident” it would meet its medium term goals and that “momentum will clearly return to our business in the fourth quarter and beyond”.

Revenues at Adidas in the first half of the year fell 3 per cent in euro terms from the same period in 2012, the group revealed in August, with falling sales in the UK, Italy and Spain helping to offset a growth in sales in Latin America and China. Revenues were flat during the period, however, adjusted for currency movements.

Analysts at Citigroup said in a note after the profit warning that Adidas remained at risk of a fall in global consumer spending triggered by any fresh economic downturn, as well as a rise in commodity prices, with raw materials accounting for 60 per cent of the group’s sales costs.

But the analysts still expected Adidas shares to hit a fresh record high next year with a target of €95.

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