Adidas faces a restructure
Following a 97% drop in net profit to 5 million euros during the first quarter of 2009, Adidas is to restructure its regional operations.
The German sportswear brand has seen a worrying 6.6% fall in share prices as net profits sunk from EUR169m (£150m) to EUR5m (£4.4m) a year based on the January to March results.
The company has already cut 750 jobs over the year, mostly through layoffs at brands like Rockport, Reebok and TaylorMade Golf.
Adidas chief executive officer, Herbert Hainer, said he plans to cut regional headquarters across Asia and Europe; close stores and consolidate the company’s wholesale business in order to tackle the problem.
In a statement Hainer said the company had encountered a number of economic and market challenges over the first quarter, but was positive that the proposed cost cutting measures would result in a welcomed outcome.
The money saving measures includes overhauling the Adidas management structure and cutting out regional offices. The company said that earnings in the second half of this year would get a “significant” lift from World Cup sales.
Hainer added: “Our results have been materially affected by higher input prices, currency devaluation effects and restructuring costs. Although some of these items will recur again as we go through the balance of the year, I am convinced we will put most of these effects behind us in the current year.”
Ingbert Faust, analyst with Equinet accepted that there would be some improvement in the second half of 2009, particularly if demand in the United States and China enjoyed a revival.
Unfortunately for Adidas the more problematic European market accounts for nearly half of their total sales, and is highly likely to be the reason why the company still expects a low rate of decline in annual sales this year.
Last November, the company launched a star-studded campaign titled; “House Party” featuring celebrities such as Katy Perry, David Beckham and Missy Elliott to mark the brands 60th anniversary. The integrated campaign carries the tagline “Celebrate Originality.”
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