Adidas Cuts Full Year Gross Margin Target

A sneak peek of the adidas Originals by Rita Ora collection modeled by the lady herself. Launches August 21.

A sneak peek of the adidas Originals by Rita Ora collection modeled by the lady herself. Launches August 21.

Dusseldorf, Germany—Adidas’ share price fell this morning as it cut its full-year gross margin target just a week after lowering its earnings forecast.

The German athletic apparel and shoe giant said it is now forecasting a gross margin decrease to a level between 48.5% and 49%, from a previous forecast of 49.5% to 49.8%. The group’s shares fell 2.10% to €56.88 at 08:37 GMT on the news.

The new guidance comes after Adidas revealed plans to close stores in Russia and restructure its TaylorMade golf unit in a bid to drive growth and profitability. It also lowered its full-year earnings guidance.

For its first-half, Adidas this morning reported a 27% decline in net income to 348 million euros from 480 million euros a year earlier.

Gross margin narrowed by one percentage point to 49.2%, mainly due to lower margins in the retail segment and at TaylorMade-Adidas Golf, in addition to higher input costs and negative effects from less favorable hedging rates and foreign currency devaluation.

Group revenues were down 2% to 7 billion euros in the first half, from 7.13 billion euros in 2013. Currency-adjusted sales from its own retail outlets, however, rose 22% to 1.75 billion euros.

“It is with disappointment that after such a great summer of sport, I have to report that our group has not been able to meet the high expectations we laid out in our Route 2015 agenda,” said CEO Herbert Hainer. “We take full responsibility to rectify our shortfalls swiftly.

“For the remainder of 2014, our priority is to sustain the momentum we have in key categories and markets, and take corrective steps to bring more stability to our future earnings.”

 

 

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