After hacking its way from rough to bunker and back again in 2014, Adidas AG (ADDYY) said Thursday it’s more or less back on the fairway.
The German-based sportswear company, the world’s second-largest after Nike Inc. (NKE), said it expects net profit to rise by between 7%-10% this year, after a wretched 2014 in which it saw a collapse in sales at its TaylorMade golf unit, took a big write-down on the sale of its shoe brand Rockport, and ripped up its plans for the former Soviet Union due to the Ukraine crisis.
Adidas said it had written €78 million off in goodwill against its Russian business last year, in addition to cancelling a swath of planned store openings, as business slowed sharply due to the collapse of the ruble. For Adidas, as for many German companies, Russia was a market on which it had counted for a big contribution to sales and profits for years to come.
The company also took a €82 million hit on the book value of footwear maker Rockport, which it agreed to sell in January for $280 million to Berkshire Partners and New Balance.
However, it said 2015 looks brighter because it has pretty much finished clearing out excess stock at TaylorMade with massive discounting. Overall sales fell 6% in North America last year, after accounting for currency swings.
Overall operating profit fell 25% to €883 million last year, with write-downs and inventory clearances causing a second straight operating loss in the final quarter of the year. The year was rescued mainly by a strong performance in western Europe, helped by Germany’s victory in the soccer World Cup. Adidas is the German soccer team’s official kit supplier.
The company said it would keep its dividend at €1.50 a share and begin the second phase of a €1.5 billion share buyback program this month, as previously announced, as an expression of confidence in its financial position. That, combined with the brighter outlook, pushed the shares over 3.3% higher by lunchtime in Frankfurt.
Adidas last month said it has now started looking for a new chief executive to replace the long-serving Herbert Hainer. However, Hainer will still be around long enough to lay out a new five-year strategic plan at the end of the month.
