Shares tumble as Adidas warns over Russian sanctions
SHARES in Adidas fell more than 10 per cent in early trading after the sportswear group warned worsening conditions in Russia could hit profits.
The company said it plans to reduce store openings in Russia for 2014 and 2015, and close more branches to "reduce risk and protect profit" going forward.
Russia, which is due to host the World Cup in 2018, was hit by new Western sanctions earlier this week following the downing of the Malaysia Airlines flight MH17 in Ukraine.
"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," it added.
Shares fell as much as 14 per cent on Thursday morning after Adidas admitted its targets for 2015 were no longer achievable.
The World Cup sponsor said it expects a mid-to- high-single-digit sales growth for 2014 on a currency-neutral basis, down from high-single-digit. It also expects net income of approximately 650 million euros- down from a previous forecast in the region of 830 and 930 million.
Adidas also revealed sales at its TaylorMade golf business fell 18 per cent in the second quarter, offsetting a 10 per cent increase in sales on a currency-neutral basis driven by its Adidas and Reebok brands.
Ingo Speich, a fund manager at Union Investment, the tenth-biggest investor in Adidas, told Reuters: "The profit warning could almost have been predicted but the extent of it is catastrophic... unfavourable conditions are no excuse. Nike is stealing Adidas' thunder in important markets."