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 The shareholder return program would be financed mainly from the
group's free cash flow, with buybacks to start in the current
quarter and be completed by the end of 2017, Adidas said in a
statement on Wednesday.
The buybacks would not come at the expense of a planned hike in
investment in marketing, an Adidas spokesman added.
The company, struggling to keep pace with larger U.S. rival Nike in
the sportswear market, issued its third profit warning in a year in
July, blaming a plunge in sales at its golf business and exposure to
a weak Russian market.
"This is just a sop for beleaguered shareholders, but does not solve
the operational problems at Adidas. Top management seems to be under
enormous pressure," said Ingo Speich, a fund manager at Union
Investment which is the ninth-biggest investor in Adidas with a 1.2
percent stake.
Chief Executive Herbert Hainer said in August that Adidas had no
plans for a share buyback.
Adidas shares, which are down more than a third this year, traded
1.9 percent higher by 0918 GMT, outperforming Germany's blue-chip
index, which was 0.2 percent higher.
"Given our group’s strong projected cash flow generation and healthy
balance sheet, we have the necessary funding for both reinvestments
for growth as well as cash returns to shareholders," a company
spokesman said in an emailed comment.
Adidas has said it would increase spending on marketing and invest
more in its own stores, although it is scaling back expansion plans
in Russia due to higher risks to consumer sentiment and spending
over the Ukraine crisis.
LOSING MARKET SHARE
While Nike has encroached on Adidas's home territory in western
Europe, the German firm has failed to make serious inroads in North
America. Its U.S. rival extended its lead to take a 15 percent
global market share in 2013 compared with 10.8 percent for Adidas,
according to Euromonitor.
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Last month, Germany's manager magazin said hedge funds including
Knight Vinke, Third Point and TCI were considering buying stakes in
Adidas to pressure management to make sweeping changes, although one
of the funds dismissed this. The magazine said the funds would
seek radical changes at Adidas, including the removal of CEO Hainer
and the possible spin off of fitness brand Reebok and golf label
TaylorMade.
Hainer had his contract extended until 2017 earlier this year to
allow the company to work on a succession plan. He has recently
overhauled top management, appointing Roland Auschel and Eric
Liedtke as new heads of global sales and global brands.
Adidas said the buybacks were in addition to the company's policy of
paying out 20-40 percent of its net income as a dividend to
shareholders .
Adidas also said it would issue two Eurobonds with a total volume of
up to 1 billion euros - with a seven and 12 year term - saying it
would use the proceeds to pay down debt and to prefund future debt
maturities, pension payments and returns to shareholders.
($1 = 0.7925 euro)
(Reporting by Emma Thomasson; Editing by Keith Weir)
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