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Nov 5, 2015
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Adidas to intensify marketing drive as U.S. sales rebound

By
Reuters
Published
Nov 5, 2015

German sportswear company Adidas, trying to muscle into Nike's home territory, plans to increase spending on marketing again after high-profile sponsorship deals and celebrity partnerships helped rekindle U.S. sales.

Herbert Hainer. - Adidas


Adidas said it would seek to build on its momentum by lifting promotional spending further in the fourth quarter. The company had said it would spend 13-14 percent of sales on marketing this year, compared with 10-11 percent for most rivals.

The world's second-biggest sportswear firm has scored with "Yeezy" sneakers designed by Kanye West and Manchester United kit launched in August after it displaced Nike as new suppliers to the English soccer team in an expensive 10-year deal.

After slipping last year into third place in the U.S. market behind Nike and fast-growing Under Armour, Adidas has made a big push in North American sports, agreeing a partnership with the National Hockey League and sponsorship deals with top NHL and National Football League players.

Third-quarter sales of 4.76 billion euros ($5.17 billion) were up 18 percent, or 13 percent excluding the impact of currencies, beating an average analyst forecast for 4.5 billion euros and accelerating from 5 percent the previous quarter.

Attributable net income rose 10 percent to 311 million euros, ahead of consensus forecasts for 306 million.

Adidas shares, up 49 percent this year, jumped 3.6 percent by 0818 GMT, making them the biggest gainer in a flat German blue-chip index .GDAXI.

"Brand Adidas has seen a turnaround with new initiatives and products. It is back to gain market share even in the United States," said Kelper Cheuvreux analyst Jurgen Kolb.

Adidas said currency-neutral sales in North America rose 6 percent, after a flat first half, driven by double-digit sales growth for the core Adidas brand, the fastest pace since 2011.

Adidas raised its full-year outlook, saying it now expects currency-neutral sales to increase at a high-single-digit rate, up from a previous "mid single-digit" rate. Net income from continuing operations excluding goodwill impairment should rise by around 10 percent, versus a previous 7-10 percent target.

It now expects currency-neutral sales in North America to grow at a mid-single-digit rate from a previous low-to mid-single-digit rate.

The company's TaylorMade golf business -- which it has said it could consider selling due to the sport's declining popularity -- also saw revenues rise a currency-neutral 6 percent, driven by double-digit growth in North America.

Adidas said it was continuing to streamline the TaylorMade business and would cut its global staff by 14 percent by the end of the year, which it said would hit group profitability by a low double-digit million euro amount in the fourth quarter.

"The investments into our brands and a leaner golf organization will ... set us up for sustainable profitability improvements from 2016 onwards," Chief Executive Herbert Hainer said in a statement.

Adidas said it would extend the contract of global sales director Roland Auschel, seen as a possible contender to succeed long-serving Hainer when his contract ends in 2017, by another three years to 2019.


 

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