Adidas takes a shoeing from Reebok

By on March 11, 2013

The world’s largest sportswear manufacturer has been forced into a loss for the final three months of 2012 thanks to ‘irregularities’ at its Reebok India division. But it has still upped the dividends says Michael Northcott.

The Adidas group announced a loss of R2.75billion in the final three months of 2012, which the firm blamed mainly on having to change its expectations for growth at Reebok. The brand has been performing particularly badly in North America, Brazil and Latin America, where it is failing to get decent traction with trainers designed to boost muscle tone.

The weakness of the Reebok brand appears to be an ongoing woe for Adidas: last year it cut its 2015 sales target for the trainer-maker by a third, and Adidas’ full-year profit fell 3.4% to €920m. Not to mention some ‘commercial irregularities’ – or, what most people would call ‘fraud’ – were discovered in its Indian division in the second quarter of 2012. There is no indication of wrongdoing by the firm itself, but it is a headache nonetheless.

Furthermore, the Reebok brand suffered because a US National Hockey League players’ dispute resulted in a dramatic reduction in the number of games played during the season – so sponsorship-driven sales were not as plentiful as hoped.

Still, neither investors nor bosses seem to think any of this is an issue. The firm simultaneously announced proposals to increase the dividend by 34%, prompting the share price to jump 3.7% in early trading on Thursday. Chief executive Herbert Hainer said: ‘2012 has been another successful year for the Adidas group. Our products and brands were again at the fore, not only being the most visible at the year’s major sports events, but also enjoying several important market share victories along the way.’

There’s no accounting for, er, market confidence, hey?

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