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Reebok writedowns hit Adidas results

Company reports an unexpected loss in the fourth quarter

Image Credit: Reuters
Herbert Hainer, chief executive officer of Adidas, and chief financial officer Robin Stalker attend the company’s annual news conference in Herzogenaurach, where Adidas reported an unexpected loss in the fourth quarter, with results hit by writedowns linked to the weak performance of Reebok.
Gulf News

Berlin: Adidas, the world’s second largest sports apparel firm, reported an unexpected loss in the fourth quarter due to writedowns linked to the weak performance of its struggling Reebok brand in the United States and Latin America.

Reebok has struggled to recover from an ill-fated push into shoes designed to improve muscle tone as you walk. It has also been hurt by fraud at its Indian unit, the loss of an American football contract, and a lockout at the National Hockey League (NHL) in the United States that almost wiped out the season.

Adidas, which bought Reebok in 2005 for $3.8 billion (Dh13.97 billion) to try to close the gap with market leader Nike, is now trying to reposition it in the fitness sphere, providing clothes and shoes for a range of activities from aerobics to yoga and dance.

But after two quarters of declining sales, Bavaria-based Adidas in November cut its 2015 sales target for Reebok by a third.

Reebok saw sales fall 12 per cent in the fourth quarter to 428 million euros (Dh2.08 billion, $556.4 million), Adidas said on Thursday, while sales at the hockey unit - Reebok-CCM Hockey - dropped 18 per cent due to the NHL lockout.

Overall, Adidas, which competes with Nike and Puma in the highly competitive market for soccer gear and running shoes, made a fourth quarter operating loss of 239 million euros, compared with analyst expectations for profit of 28.6 million.

It took a goodwill impairment of 265 million euros at the pre-tax level to reflect lower predicted growth for Reebok, especially in the United States, Latin America and Portugal. The group also restated its accounts for 2011 to take account of the fraud at Reebok India.

It said the impairment charge was non-cash in nature and therefore did not affect liquidity.

Adidas proposed an increase in the dividend to 1.35 euros for 2012, from 1.00 euros the previous year.

For 2013, Adidas said it expects sales to increase at mid-single-digit rate in 2013 from 2012’s record level of 14.9 billion euros, though with a slower start to the year.

Earnings per share will rise by between 12 and 16 per cent to between 4.25 and 4.40 euros.