Adidas posts slight earnings increase Thursday

Posted Aug 6, 2015 by David Goehst
Thanks to strong Western Europe and Chinese sales reports, Adidas AG posted a small increase in Q2 earnings but indicated it may shed its Taylor-Made line of golf equipment.
Adidas store in San Francisco  Calif.
Adidas store in San Francisco, Calif.
Net profits increased for the #2 ranked sports gear manufacturer, hitting $159 million as opposed to $2 million less from a year ago, with strong online earnings contributing to the 1.4 percent increase. Once lagging in European and Chinese markets for consumer sentiment, the company rode strong performances by Reebok and Adidas to its Q2 finish.
Chief executive of Adidas, Herbert Hainer, fell under strong pressure from investors stemming from several warnings of profitability issues, effectively ditching 2014-2015 financial targets. This March, a more robust strategy was rolled out which resulted in an uptick in Q1 earnings, which caused Hainer to announce a fiscal nirvana was underway. Unlike last year when Adidas rode strong FIFA earnings, revenue derived from strong customer activity in core areas: shoes, clothing and sporting gear.
Utilizing different avenues for optimizing the customer experience has driven Adidas sales through the ceiling, too, offering a more aesthetically pleasing website that’s much easier to navigate. Marketing through multiple channels, more specifically Twitter, has increased engagement with promotions which contributed to Adidas' slight earnings hike.
One area drawing corporate concern is the performance of TaylorMade products. Consumer demand has remained sluggish throughout 2015, even with Hainer calling for an immediate recovery to it’s premier golfing line. In the second quarter, adjusted sales for TaylorMade dropped 26 percent, causing Guggenheim Parters to step in and analyze a potential course of action to keep profits afloat with TaylorMade, Ashworth and Adams lines. If Hainer decides to focus corporate growth around its shoe line, TaylorMade could be up for sale.
In North America, currency-adjusted sales dropped 0.5 percent in Q2 despite pulling a Q1 sales growth. Marketing costs and stronger advertising from Under Armor may have contributed to the slip, and to compensate, Adidas made several managerial shifts while investing more in advertising. Conversely, organic sales throughout Western Europe and China jumped 12 and 19.3 percent, respectively.
Adidas expects Q3 and Q4 to have slight increases in both sales and earnings.