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Adidas issues profit warning following World Cup spend

Article By: ,  Financial Analyst
August 1, 2014 11:15 AM

German sportswear giant Adidas has issued a profit sending shares in the company tumbling.

The firm saw stock value drop by 16 per cent on Thursday (July 31st) and fell 4.02 per cent to 57.02 as of 8:32 BST on Friday. Adidas added that it plans to open fewer stores than previously planned in Russia due to ongoing uncertainties in the country. Despite being the official kit supplier to the eventual World Cup winners, Germany, the company spent vast amounts on marketing during the tournament.

Adidas confirmed that net income for 2014 would stand at €650 million (£515 million), a drop from the €830 million to €930 million it had targeted prior to the start of the financial year. In regards to Russia, the company is scaling back its initial expansion due to rising concerns over the consumer market and the drop in the value of the rouble.

The ongoing crisis in Ukraine has also added further uncertainty to Adidas' plans with the company looking to close a number of outlets and open fewer newer stores than previously thought. The German company currently runs 1,000 stores in the country but this figure could decrease in the future.

Herbert Hainer, adidas chief executive, said: "Everything we announced today has one objective: to strengthen our brands, to drive consumer desire, and to set our group up for long-term success.

"We will return the group to a higher and more consistent level of earnings growth in the mid to long term."

Adidas' profit warning comes despite the company signing a record-breaking deal with Manchester United. The company will take over from Nike as the club's main kit supplier in an agreement worth £750 million over ten years, the biggest sportswear contract of its kind. It dwarfs the current largest between Adidas and Real Madrid valued at £31 million a year.

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