Adidas issues profit warning following World Cup spend

<p>Adidas admitted to higher marketing spend during the World Cup.</p>

German sportswear giant Adidas has issued a profit sending shares in the company tumbling.

The firm saw stock value drop by 16 per cent on Thursday (July 31st) and fell 4.02 per cent to 57.02 as of 8:32 BST on Friday. Adidas added that it plans to open fewer stores than previously planned in Russia due to ongoing uncertainties in the country. Despite being the official kit supplier to the eventual World Cup winners, Germany, the company spent vast amounts on marketing during the tournament.

Adidas confirmed that net income for 2014 would stand at €650 million (£515 million), a drop from the €830 million to €930 million it had targeted prior to the start of the financial year. In regards to Russia, the company is scaling back its initial expansion due to rising concerns over the consumer market and the drop in the value of the rouble.

The ongoing crisis in Ukraine has also added further uncertainty to Adidas' plans with the company looking to close a number of outlets and open fewer newer stores than previously thought. The German company currently runs 1,000 stores in the country but this figure could decrease in the future.

Herbert Hainer, adidas chief executive, said: "Everything we announced today has one objective: to strengthen our brands, to drive consumer desire, and to set our group up for long-term success.

"We will return the group to a higher and more consistent level of earnings growth in the mid to long term."

Adidas' profit warning comes despite the company signing a record-breaking deal with Manchester United. The company will take over from Nike as the club's main kit supplier in an agreement worth £750 million over ten years, the biggest sportswear contract of its kind. It dwarfs the current largest between Adidas and Real Madrid valued at £31 million a year.

Find up to date information on the FTSE 100 and spread betting strategies at City Index

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.