Adidas Q3 revenues up but golf continues to be a deterrent

REPORT_ During the third quarter of 2014, the Adidas Group continued to deliver robust top-line results. Group revenues increased 9 percent on a currency-neutral basis, driven by a double-digit sales increase in retail and a high-single-digit revenue growth in wholesale. All regions, except North America, contributed to the currency-neutral revenue growth. Western Europe increased 10 percent, mainly as a result of strong sales increases in Germany, France, Spain and the UK.

In European Emerging Markets, currency-neutral revenues were up 19 percent, driven by double-digit growth in Russia/CIS. Group sales in North America decreased 1 percent on a currency-neutral basis, as mid-single-digit sales growth at Adidas was more than offset by declines at TaylorMade-adidas Golf and Reebok. In Greater China, Group sales were up 13 percent on a currency-neutral basis, due to continued momentum across all channels. Currency-neutral revenues in other Asian markets grew 6 percent driven by double-digit sales increases in South Korea and India. In Latin America, currency-neutral sales grew 16 percent, with double-digit increases in most markets, in particular Argentina, Brazil and Mexico.

Third quarter sales at Adidas increased 12 percent on a currency-neutral basis, driven by double-digit sales growth in the sport performance football and running categories, as well as at Adidas Originals & Sport Style. Sales at Reebok grew 7 percent on a currency-neutral basis, driven by sales momentum in the fitness training, walking and fitness running categories. Revenues in the TaylorMade-Adidas Golf segment declined 36 percent on a currency-neutral basis, as a result of the continued weakness in the golf market as well as TaylorMade-Adidas Golf’s ongoing efforts to clean retail inventories and the timing of new product introductions compared to the prior year period.

Revenues at Reebok-CCM Hockey increased 15 percent on a currency-neutral basis mainly due to growth in key categories such as skates and protective equipment as well as in hockey apparel. Rockport sales increased 5 percent currency-neutral. Currency translation effects had a negative impact on sales in euro terms. Group revenues increased 6 percent to 4.118 billion euros (5.150 billion dollars) in the third quarter of 2014.

“Our Group delivered a solid third quarter with accelerated growth rates in many of our key markets and categories. At the same time, we have been aggressively addressing our key challenges: restructuring and stabilising TaylorMade-adidas Golf, adjusting our business in Russia/CIS and intensifying our efforts to revive momentum and growth in the US,” opined Herbert Hainer, CEO of the Adidas Group.

In the first nine months of 2014, Group revenues increased 6 percent on a currency-neutral basis, driven by sales increases in wholesale and retail. Currency translation effects had a negative impact on sales in euro terms. Group revenues grew 1 percent to 11.116 billion euros (13.902 billion dollars) in the first nine months of 2014. In the first nine months of 2014, currency-neutral wholesale revenues increased 6 percent, due to sales growth at both Adidas and Reebok. Currency-neutral retail sales were up 21 percent versus the prior year as a result of double-digit sales increases at Adidas and Reebok. Revenues in other businesses were down 17 percent on a currency-neutral basis, due to double-digit sales declines at TaylorMade-Adidas Golf.

By brand, revenues at Adidas grew 11 percent on a currency-neutral basis, driven by double-digit sales growth in the sport performance football and running categories, as well as at Adidas NEO. Sales at Reebok grew 6 percent on a currency-neutral basis. Revenues in the TaylorMade-Adidas Golf segment declined 29 percent on a currency-neutral basis.

In the first nine months of 2014, currency-neutral adidas Group sales grew in all regions except North America. Revenues in *Western Europe* increased 7 percent on a currency-neutral basis, driven by sales increases in Germany, France, Spain, the UK and Poland. In *European Emerging Markets*, Group sales were up 20 percent on a currency-neutral basis, with double-digit sales increases in all of the region’s major markets. Currency-neutral sales for the Adidas Group in *North America* decreased 7 percent, mainly due to sales declines in the USA. Sales in *Greater China* increased 10 percent on a currency-neutral basis. Currency-neutral revenues in *other Asian markets* grew 2 percent, driven by sales increases in South Korea and India. In *Latin America*, sales grew 22 percent on a currency-neutral basis, with double-digit increases in most markets, in particular Argentina, Brazil, Mexico and Colombia.

Management expects Adidas Group sales to increase at a mid- to high-single-digit rate on a currency-neutral basis in 2014. In particular the adidas brand will benefit from the 2014 FIFA World Cup, where Management expects record sales of two billion euros (2.5 billion dollars) in the football category. In 2014, the Adidas Group gross margin is forecasted to decrease to a level between 48 percent and 48.5 percent compared to 49.3 percent in 2013. Management expects the operating margin for the Adidas Group to be at a level between 6.5 percent and 7 percent compared to 8.7 percent in 2013.