PARIS — Adidas AG, the world’s second-largest sportswear company, on Wednesday reported a 93 percent slide in second-quarter net profits but reaffirmed its 2009 outlook and said the worst is over.
In a bid to make its organization more efficient, the German company also said it has reshuffled senior management duties, with chief executive officer Herbert Hainer taking on responsibility for global sales.
Adidas said net profit for the quarter ended June 30 fell to 9 million euros, or $12.2 million at average exchange rates, from 116 million euros, or $181 million, a year earlier.
Sales slid 2.5 percent to 2.46 billion euros, or $3.34 billion, hurt by reduced consumer spending across all brands and by the comparison with the same period a year earlier, when Adidas benefited from the Euro 2008 soccer tournament. On a currency neutral basis, sales declined 8 percent in the quarter.
The group’s gross margin decreased 5.1 percentage points to 45 percent in the second quarter as a result of higher costs, the effect of currency devaluation, particularly the Russian ruble, as well as a “highly promotional retail environment,” Adidas said.
Despite the dramatic drop in profits, the results were ahead of expectations, as analysts had forecast a net loss of 2.2 million euros, or $3.2 million.
Turning to the second half of the year, Adidas expects earnings to be more positive, helped by lower costs and the run-up to the 2010 soccer World Cup. However, it cautioned earnings per share in the second half won’t reach the levels achieved in the second half of 2008.
For 2009, the company said it still expects a low- to midsingle-digit percentage drop in constant currency terms, as well as a decline in gross margin, operating margin and EPS.
“The impacts of the economic downturn and repercussions on consumer spending are well documented and certainly continued to influence our performance in the second quarter,” Hainer stated.
However, Hainer added business didn’t deteriorate further since the first quarter. “As a result, I believe we have seen the bottom of our financial performance this year,” he said.
Hainer will assume direct responsibility for global sales, while Erich Stamminger, a member of the group’s executive board, will oversee global brands, including Adidas and Reebok. Adidas acquired Reebok in 2006 in a move to better compete against Nike Inc., the world’s largest sportswear company, and is working to restructure and revamp the brand.
Reebok’s sales in the second half are expected to decline at a low- to midsingle-digit rate compared with the same period a year earlier on a currency neutral basis, according to Adidas, after the brand didn’t hit targets in emerging markets.
In a bid to save on costs, Adidas is cutting 1,000 of its 39,000 staff this year, closing regional offices and potentially some of its underperforming stores.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast