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International tensions force rethink on Adidas plans

Adidas has lowered its profit expectations for the full year after citing the impact on the sportswear company of the political tensions surrounding Russia.

Adidas has invested heavily in Russia by serving as the national football team’s technical sponsor, and the company will also be a sponsor of the 2018 Fifa World Cup in the country.

However, the tense situation between Russia and Ukraine following the former’s annexation of Crimea, exacerbated by the threat of harsher sanctions on the country from the west, will have an impact on Adidas’ figures.

Adidas said that it had decided to “significantly reduce” its plan for store expansion in the region in 2014 and 2015, and would increase the number of store closures. The company anticipates net profit of about €650m ($870m) this year, down from its previous forecast of between €830m and €930m. Sales are expected to grow at a “mid- to high-single digit” rate, with the company having previously said that they would grow at a high-single digit rate. Adidas’ share price had plummeted by 15 per cent by late afternoon.

“The recent trend change in the Russian rouble as well as increasing risks to consumer sentiment and consumer spending from current tensions in the region point to higher risks to the short-term profitability contribution from Russia and other former Soviet republics,” Adidas said.

Adidas added that “poor retail sentiment and the slow liquidation of old inventory in the golf category across the globe” would have an adverse impact on the TaylorMade-Adidas Golf division, but said that the Adidas and Reebok brands are benefiting from “improving momentum.”

Adidas chief executive Herbert Hainer said: “While we have delivered notable achievements with our Route 2015 plan, we also accept that we have not executed to our high standards at all times or provided enough flexibility to react in adverse market conditions. This we now tackle head on. By cleaning up markets, investing with more conviction in our growth opportunities and driving more agility through our new organisational set-up, we will return the Group to a higher and more consistent level of earnings growth in the mid to long term.”