Adidas to intensify marketing drive as U.S. sales rebound

[November 05, 2015]  By Emma Thomasson

BERLIN (Reuters) - German sportswear company Adidas, trying to muscle into Nike's home territory, plans to increase spending on marketing again after high-profile sponsorship deals and celebrity partnerships helped rekindle U.S. sales.

Adidas said it would seek to build on its momentum by lifting promotional spending further in the run-up to Christmas. The firm had said it would spend 13-14 percent of sales on marketing this year, compared with 10-11 percent for most rivals.

The world's second-biggest sportswear firm has scored with "Yeezy" sneakers designed by Kanye West and soccer kit for Manchester United <MANU.N> and Italian champions Juventus launched this summer after it displaced Nike as new suppliers to both teams.

After slipping last year into third place in the U.S. market behind Nike and fast-growing Under Armour <UA.N>, Adidas has made a big push in North American sports, agreeing a partnership with the National Hockey League (NHL) and sponsorship deals with top NHL and National Football League (NFL) players.

Adidas will seek to capitalize on those deals as well as launching a major basketball campaign, Chief Executive Herbert Hainer told a conference call for journalists. Its campaign for the 2016 European soccer championship will start next week when it launches the new German national team jersey.

Third-quarter sales of 4.76 billion euros ($5.17 billion) were up 18 percent, or 13 percent excluding the impact of currencies, beating an average analyst forecast for 4.5 billion euros and accelerating from 5 percent the previous quarter.

Attributable net income rose 10 percent to 311 million euros, ahead of consensus forecasts for 306 million.

Adidas shares, up 49 percent this year, jumped 5 percent by 0957 GMT, making them the biggest gainer in a 0.3 percent firmer German blue-chip index.

"Brand Adidas has seen a turnaround with new initiatives and products. It is back to gain market share even in the United States," said Kelper Cheuvreux analyst Jurgen Kolb.

BRIGHTER OUTLOOK

Adidas said currency-neutral sales in North America rose 6 percent, after a flat first half, driven by double-digit sales growth for the core Adidas brand, the fastest pace since 2011.

Adidas raised its full-year outlook for sales and profits and said it should be able to repeat the performance next year, forecasting that currency-neutral sales and operating profit should both rise at a high-single-digit rate.

"We are winning big time. Both Adidas and Reebok are enjoying great momentum across the globe," Hainer said, referring to the company's other main brand.

However, higher marketing spending and currency effects look set to keep a lid on the operating margin, which Adidas said should stay flat in 2016 after a forecast 6.5-7 percent in 2015, far from the 13.6 percent Nike recorded for the year to end-May.

Hainer said a strategic review of the company's TaylorMade golf business should be completed in the first quarter of 2016, adding that it has already attracted potential bidders.

In the meantime, Adidas will keep working to restructure the unit, suffering from sport's declining popularity, and would cut its global staff by 14 percent by the end of the year, which would incur a small hit to group profits in the fourth quarter.

(Reporting by Emma Thomasson; Editing by Georgina Prodhan and Keith Weir)
 

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