Adidas share price up, projects higher net income, sales in 2015

Adidas AG reported on Thursday a net loss in the latest quarter but the German sportswear group projected strong net income growth in the year ahead.

The worlds second-largest maker of sportswear, lagging behind Nike, stated a net loss of €140 million for the three months ended December, compared to a loss of €10 million in the fourth quarter of 2013.

Adidas contributed the decline to unfavorable currency impacts, increased input costs as well as goodwill impairment losses of €78 million and a €71-million charge related to the divestiture of its Rockport business.

However, the company generated £3.61 billion in sales during the quarter, up 6% compared to the same period in the previous year, driven by double-digit revenue growth from its adidas and Reebok brands in Europes emerging markets. With the exception of North America, the company scored revenue increases in all of its markets.

During the period adidas remained the driver of growth with brand revenue increase of 11%, excluding currency shifts, followed by Reebok-CCM Hockey with a 2% gain and Reebok with 1%. Sales of the companys TaylorMade-adidas Golf shoes decline 24% as the division was aimed at clearing retail inventories.

All-in-all Adidas reported a net income of €490 million in 2014 compared to €787 million in the previous year. Excluding goodwill impairments and the loss from discontinued operations of Rockport, Adidas said net income was in line with its guidance of €650 million, after the company lowered it in July from between €830 million and €930 million. Revenue for the year climbed 2% to €14.534 billion.

However, Adidas projected to reach a growth of between 7% to 10% in net income from continuing operations in 2015 with a currency-neutral revenue increase of a mid-single-digit percentage rate.

Net debt at end of December stood at €185 million compared to a positive net cash of €295 million in 2013, reflecting higher than expected capital expenditure as Adidas upgraded its logistic infrastructure. Additionally, the company used €300 million in order to cover part of its share buyback program.

“2014 was a year with ups and downs for the adidas Group. But we tackled the challenges resolutely and achieved our adjusted top- and bottom-line targets,” said Chief Executive Herbert Hainer.

Adidas gained 0.82% on Wednesday and closed at €69.00 in Frankfurt. On Thursday the stock jumped 3.61% to €71.49, marking a one-year decrease of 11.68%. The company is valued at €14.32 billion.

According to the Financial Times, the 33 analysts offering 12-month price targets for Adidas have a median target of €63.00, with a high estimate of €100.00 and a low estimate of €49.40. The median estimate represents a 8.70% decrease from the last closing price.