Adidas Falls on Profitability Forecast and Nike’s Golf Pullbackby and
Full-year gross margin forecast disappoints some analysts
Nike stops making golf equipment, could weigh on Adidas sale
Adidas AG shares fell as the sportswear maker’s profitability forecast disappointed some analysts, who also raised concerns that Nike Inc.’s decision to stop selling golf equipment could weigh on the German company’s sale of its own golf division.
The shares fell 3 percent to 143.45 euros at 11:47 a.m. in Frankfurt, the biggest drop in more than a month. Full-year gross margins will narrow as much as 0.3 percentage point from 48.3 percent a year earlier, it said in a statement Thursday. The company previously forecast a drop of as much as 0.5 percentage point.
The decline in the shares shows how investors have raised the bar for the maker of Stan Smith sneakers after it boosted its profit forecast four times this year, most recently last week. Adidas is the best performer in Germany’s benchmark DAX Index, soaring 58 percent this year, after being its laggard in 2014. North American sales rose 26 percent in its second quarter, underscoring a comeback that’s seen Adidas reclaim market share in the U.S. from Nike.
“While Adidas has improved gross margin guidance for the year, the expectation was for a greater upward revision,” John Guy, an analyst at MainFirst AG, said by phone. “It’s unclear whether Nike will exit their golf hardware business via a disposal or not. If Nike puts that business on the block, that will create a larger buyers’ market and dilute the potential price tag Adidas can get for its own golf business.”
Nike said Wednesday that it would shift away from the golf clubs, balls and bags most notably championed by Tiger Woods, but it will continue selling footwear and apparel. The world’s largest maker of sporting goods gave no indication of whether it would sell that business or wind it down. After years of declining sales, Adidas in May announced its intention to sell its golf business. At the time, Guy estimated that the business could fetch 470 million euros.
Adidas reiterated its forecast that currency-neutral sales growth this year will increase in the “high teens,” while profit from continuing operations will increase as much as 39 percent, approaching 1 billion euros. Last month rival Puma SE forecast that its gross margin would remain stable at 45.5 percent in 2016.
“Following significant share price performance we find it difficult today to justify a target significantly higher than 128 euros,” Equinet analyst Mark Josefson said in a note, downgrading the shares to sell.