London - Adidas AG, the world’s second-largest maker of sporting goods, fell the most in more than a year after cutting its 2013 profit forecast late on Thursday.
The shares slid as much as 5.9 percent to 77.71 euros, the steepest intraday drop since June 1, 2012.
The strength of the euro, a glitch in a new Russian distribution site and weakness in the global golf market caused Adidas to reduce the low end of its profit forecast by 7.9 percent after markets closed on Thursday. The extent of the cut surprised analysts, some of whom had trimmed estimates by about three percent earlier this week to reflect currency movements.
“The magnitude of the cut is disappointing and will weigh on management’s credibility on profit guidance,” Andreas Inderst, an analyst at Exane BNP Paribas, said in a note on Friday. He maintained an outperform recommendation on the stock, saying he expects a “healthy recovery” in sales and profitability from the fourth quarter onwards.
Adidas traded 4 percent lower at 79.24 euros as of 9.28am, the steepest drop in the Stoxx Europe 600 Index.
Net income this year will be 820 million euros to 850 million euros, Herzogenaurach, Germany-based Adidas said in a statement. The company had previously forecast net income of 890 million euros to 920 million euros.
Adidas also cut its operating margin forecast to about 8.5 percent from a previous forecast of 9 percent.
While the sporting-goods maker faces “increased headwinds”, Chief Executive Officer Herbert Hainer said in the statement, “momentum will clearly return to our business in the fourth quarter and beyond”.
Adidas, which makes almost 73 percent of its revenue outside Western Europe, joins European companies such as Puma SE and Prada SpA that have also suffered from the strength of the euro. The currency has gained about 5 percent this year, the best performer of the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
Analysts at JPMorgan Chase & Company and Berenberg Bank both cut their 2013 profit estimates for Adidas by about three percent earlier this week, citing the euro’s strength. Citigroup analysts said in a note that consensus estimates for net income may now fall by 9 percent to 10 percent.
Adidas on Thursday also further pared its sales forecast for the year, saying revenue will rise at a “low-single-digit” pace. The company said August 8 it expected sales to rise at a “low- to mid-single-digit rate”, after previously forecasting “mid-single-digit” percentage growth, because of unfavourable currency movements.
Adidas said it won’t attain its goals in Russia because of the country’s currency weakness combined with an “unexpected short-term distribution constraint” as a result of the transition to its new distribution facility in Chekhov. It expects a resolution at the beginning of the fourth quarter.
Adidas also cited weakness in the global golf market on Thursday, saying it will lead to a lower sales and profit contribution from the segment than originally forecast.
About 45 percent of the forecast cut is related to currency movements, 35 percent to Russian distribution and 20 percent to the golf market, Inderst estimated. - Bloomberg