Adidas Growth Slowed In The Three Quarter

Adidas AG, the second largest sporting goods manufacturer in the world

The group's three quarter earnings report today showed a slowdown in sales.

As of the three quarter of September 30th, Adidas AG, Adidas Group recorded a profit of 563 million euros.

The expected 565 million euros, compared with 505 million euros in the same period last year, had a 11.5% increase, but the operating profit rate fell 20 basis points to 10.4%.

Group disclosure period to Reebok

The restructuring of the brand produced a cost of 10 million euros, and the remaining 20 million euros will be recorded in the four quarter.

This one-time expenditure does not prevent the group from maintaining its annual operating profit margin at 7.5%, which means it will increase by 100 basis points over 6.5% in the 2016 fiscal year.

However, the market is still uneasy about the negative effects of the Adidas AG group and the strengthening of the gross margin in the second half of the year. Even though the group has raised its annual forecast for the four time this year, MainFirst Bank analyst John Guy has expressed disappointment at not seeing the additional tune of this year's earlier period. However, he stressed that the group's performance was stable and outperformed its counterparts in the AG.

In the three quarter, group net sales rose 13.8% to 5 billion 413 million euros, better than the 5 billion 380 million euros expected by the market, and the fixed exchange rate rose from 21% in the two quarter to 17%.

DZ Bank analyst Herbert Sturm pointed out that this is the first time that the first performance of the past few quarters has not significantly exceeded the market expectations. He gave Adidas AG (ADSGn.DE) the investment rating of "holding". As of Wednesday, 2, the stock had increased by 63% in 2016.

To maintain a strong momentum since last year's strong recovery, Kasper Rorsted Rorsted, the new CEO of Adidas AG, who took office in October this year, has to face tremendous pressure from its natural tasks.

In the three quarter, the three major markets of Adidas, Adidas, Europe, the United States and China showed a slowdown. The growth rate of fixed exchange rates in North America and greater China slowed down from 25.6% and 30.1% in the two quarter to 20.2% and 25.3% respectively. The growth rate of 14.5% in Western Europe was only half that of two quarter.

And Russia's /CIS, Latin America, Japan and MEAA (Middle East, Asia and Africa) and other smaller markets have increased speed.

The total net sales for the period amounted to 4 billion 640 million euros, an increase of 15.8% from 4 billion 7 million euros in the same period last year, an increase of 19.5% in fixed exchange rates, and an increase of 24.6% in the two quarter.

With the rapid growth in the past few quarters in the United States, the brand has already surpassed Under Armour Inc. (NYSE:UA), the second largest sports brand in the United States, and is also actively eroding the market share of Nike Nike brand.

Reebok Reebok will restructure

The sales of Reebok Reebok brand increased by 3.6% to 493 million euros, and the fixed exchange rate increased by 7.2%, which is similar to that in the two quarter.

Some investors believe that Kasper Rorsted should consider selling the brand acquired in 2005 to improve profitability.

For the reorganization mentioned in the earnings report, Kasper Rorsted said at the performance conference that the plan includes moving the brand in the centre of Boston to the Canton in Massachusetts. 150 of the 650 staff at headquarters will be reduced, and 300 will be pferred to Portland or Europe, Oregon.

In terms of channel, the brand will focus on developing wholesale business, while closing down the loss stores, which will reduce the number of factory shops in the United States by half, and the number of FitHub stores will be limited. The group will also set up exclusive global brand teams for the brand.

As for the golf business to be sold at the end of 2015, Kasper Rorsted said it is expected to sign a sale agreement with a buyer before the end of the year, but it is expected that the consequent losses will oppress the four quarter profits.

Adidas AG, Adidas group maintained a fixed rate of exchange for the whole year, registered 17%-19% growth and continued operating business net profit growth of 35%-39% over the same period.

But in the three quarter, the group's net profit of 387 million euros was 387 million euros, only 23.5% higher than that of the same period last year, but it has already been better than the 377 million euros predicted by the market.

As of September 30th, the group's inventories rose by 18.7% over the same period last year to 3 billion 203 million euros. The group explained that the increase in inventory was intended to support sales growth.

RBC Capital Markets and Canadian capital market analyst Piral Dadhania pointed out that Adidas AG Adidas group has created such a high contrast base this year. Even if the strong momentum continues, the outlook for 2017 may not be good.

Some traders also pointed out that the market thought that the best time of the group had passed and investors were selling profits.

Adidas AG (ADSGn.DE) declined to the highest level of 8.8%, and fell to 133.65 euros when no fashion Chinese net was written.

In the earnings report, Kasper Rorsted said it would ensure that Adidas AG Adidas Group continued to grow in the position of growth oriented enterprises and maintain sustained sales and profit growth in the future.