Adidas cuts its 2014 outlook and scales back its 2015 targets, citing concerns over Russia and its golf business. Coming just weeks after Adidas snatched Manchester United's kit sponsorship from Nike, Joel Flynn asks what the rivalry between the two companies reveals about the sportswear market.
By all accounts it had been a good summer for Adidas First their sponsored team Germany winning the World Cup, then acquiring a lucrative sponsorship of soccer giants Manchester United from arch rivals Nike. But now the German company has been forced to cut its 2014 outlook - and it says its 2015 targets are no longer achievable. Adidas has cited concerns about expansion in Russia, and a need to overhaul its business. Brenda Kelly is from IG. SOUNDBITE: IG Market Analyst, Brenda Kelly, saying (English): "A hugely competitive place to be in against the likes of Nike, so it does seem that from the Adidas point of view that the outlook is not altogether grim, but certainly the fluctuations we've been seeing in some of the key emerging markets are affecting their bottom line." The world's second biggest sportswear firm has been losing ground to Nike. Despite a two percent rise in second quarter sales and net income coming in above analysts forecasts, Adidas said there were big risks. Higher market spending for the World Cup and a big fall in golf sales have offset otherwise strong underlying growth. But the big concern for the company will be currency effects on the bottom line. SOUNDBITE: IG Market Analyst, Brenda Kelly, saying (English): "The pull back we've seen in this particular sector is affecting Adidas quite naturally, and of course the competition you've got there as well, the likes of Nike, and other sporting goods areas also kind of pushing for sports sponsorship deals as well, so I think it's just one area in just a long list of problems for Adidas for the time being, but it does seem to be FX hedging that's the main risk that's associated with it at this moment in time." Shares in Adidas tumbled in early trade. The company says it will give further details on August 7 when it reports full quarterly results.