Chasing Nike

World Cup Joy Fails to Boost Adidas’ Poor Performance

Germany's Mario Götze celebrates after scoring against Argentina in the World Cup final soccer match  in Rio de Janeiro, Brazil, Sunday, July 13, 2014. Source: AP
Germany's Mario Götze celebrates after scoring against Argentina in the World Cup final soccer match in Rio de Janeiro, Brazil, Sunday, July 13, 2014.
  • Why it matters

    Why it matters

    Adidas has lowered its financial outlook again, raising questions how chief executive Herbert Hainer can prevent losing any further market share.

  • Facts

    Facts

    • Adidas’ shares have plunged over 30 percent this year.
    • The company points to currency fluctuations, tensions with Russia and poor sales in the golf division as the culprits.
    • U.S. rival Nike is outperforming Adidas in almost all areas despite facing similar challenges.
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    Audio

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The World Cup in Brazil was a triumph for sporting goods maker Adidas. Two teams – Germany and Argentina – wore the brand’s iconic three stripes as they faced each other in the final last month. Sales of the German national team’s jersey were brisk throughout the summer, keeping investors smiling and happy.

Lost in the soccer-fuelled euphoria, however, were disappointing results in other areas of the company. And this week it became abundantly clear that the Bavarian-based company is facing its largest crisis in many years.

The chief executive of Adidas, Herbert Hainer, not only had to quash the financial forecast for the year, but he also had to abandon the company’s long-term goals.

It has long been obvious to investors that Adidas is struggling. Share prices have plunged by 20 percent since the beginning of the year, something even the most critical of shareholders could not have foreseen. The stock took yet another hit on Thursday, dropping 16 percent following the announcement of the quarterly figures.

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German Adidas soccer jerseys on sale in Berlin. Source: AFP

 

Yet it was apparent many months ago that Adidas would not achieve its own targets. Late last summer, Mr. Hainer was forced to amend his forecast for 2013, which he blamed at the time on the strength of the euro, problems with its Russian operations and weak sales in its Taylor-Made golf division.

Mr. Hainer has yet to get a handle on these problems and, once again, they are being cited as the reason why things at Adidas are going so badly. It’s certainly true a manager cannot do anything about currency fluctuations or the escalating tensions between Russia and the West, but American archrival Nike is dealing with similar challenges, but much more successfully. The U.S. company is growing, earnings are strong and even in Germany, the home of Adidas, and the Nike “swoosh” is gaining more and more market share.

It’s still unclear how Mr. Hainer intends to stop the triumphant march of the Americans. He announced in sort of a vague way higher marketing budgets and a restructuring of some parts of the company while saying Adidas wants to become more aggressive. It’s high time something is done or Nike will leave Adidas in the dust.

The author is Handelsblatt’s correspondent in Munich. He can be reached at: hofer@handelsblatt.com

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