The Adidas Group ended the year with vigorous sales increases for the Adidas and Reebok brands but its net loss widened for the quarter due to unfavorable exchange rates, higher input costs and several one-off charges.
The company's sales were up by 6.5 percent to €3,610 million for the quarter, amounting to an increase of 6 percent in constant currencies. But the gross profit margin was down by 2.6 percentage points to 44.9 percent. Russian discounts and the devaluation of the ruble caused 0.6 percentage points of this and another 0.5 percentage points were blamed on input costs, while the remaining 0.6 percentage points were caused in equal measure by less favorable hedging rates and clearance activities at TMAG.
The company's operating profit was nearly halved to €38 million – and this was excluding goodwill impairment losses of €78 million for the quarter. Net income from continuing operations and without impairment charges shrank to €10 million, down from €32 million for the same three months in 2013.
With the goodwill impairment charge and another loss of €71 million related to the planned divestiture of Rockport, the company suffered a net loss of €139 million for the last quarter, compared with a loss of €10 million for the same quarter last year.
However, the group was upbeat about its sales performance outside of the golf category. Sales for the Adidas brand were up by 11.1 percent to €2,870 million for the quarter. It was an increase of 11.3 percent in constant currencies, driven by running and training as well as Originals and Neo.
As for Reebok, its sales dipped by 1.6 percent for the last quarter to €420 million but they inched up by 0.6 percent in constant currencies. Double-digit sales increases in the fitness training, walking and studio categories made up for sharp drops in the fitness running and Classics categories.
Sales continued to shrink at TMAG for the quarter, down by 21.0 percent to €240 million, which was a drop of 24.2 percent in constant currencies. The group explained that it was continuing to clear up inventories, and the last quarter's results were also affected by a shift in the timing of deliveries.
The entire group's sales were robust in Western Europe, with an increase of 14.7 percent to €850 million and an underlying improvement of 13.4 percent without exchange rate changes. European Emerging Markets suffered a decline of 2.7 percent to €441 million, which could be attributed to the decline of the ruble. In constant currencies, sales in this region jumped by 16.0 percent for the quarter, with increases of 18 percent for the Adidas brand and 25 percent for Reebok.
The other way around, sales in North America were down by 4.2 percent in dollars but they moved up by 3 percent in euros to €805 million. While the group's wholesale turnover in North America slipped by 9 percent for the quarter, its retail sales were up by 16 percent, with a comparable sales increase of 8 percent.
The Adidas brand managed a sales rise of 4 percent in North America, but the Other Businesses unit including TMAG tumbled by 12 percent and Reebok's sales shrank by 17 percent. Hainer attributed Reebok's contracting turnover to falling sales in running and Classics.
Greater China delivered yet another quarter of robust expansion, up by 18.9 percent to €488 million. Chinese sales were up by 11.0 percent in constant currencies, with an improvement of 12 percent for the Adidas brand alone.
When it comes to other Asian markets, sales contracted by 1.0 percent to €611 million and that was still a decline of 0.3 percent in constant currencies, but this was entirely due to sluggish golf sales in Japan and South Korea. The Adidas brand inflated its underlying sales by 8 percent while Reebok was stable for the quarter.
Latin America generated sales growth of 6.9 percent to €415 million. After a sales increase of 32 percent for the group's Latin American sales in the last quarter of 2013, it achieved another rise of 12.3 percent in constant currencies, with increases of 13 percent for Adidas and 11 percent for Reebok.
The group's retail sales jumped by 11.6 percent to €1,043 million and its wholesale turnover advanced by 8.1 percent to €2,217 million. However, shrinking sales at TMAG led to a decline of 13.6 percent in the sales of the Adidas group's Other Businesses unit, down to €350 million. The decline was acute in large markets such as Japan and South Korea, so that the unit's sales shrank by 34 percent for the quarter in Other Asian markets.
