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Asia Today ISSN 1861-4604 Thursday, October 18, 2018

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Adidas to open fewer stores in Russia over Ukraine crisis

ADIDAS now expects net profit of about 650 million euros

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BERLIN - Sportswear maker Adidas issued a profit warning Thursday while scaling down plans of opening stores in Russia in the wake of Ukraine crisis.

The German sports equipment maker saw its shares fall 16 percent on Thursday.

Lowering its full-year profit target, Adidas cited increasing risk in the Russian market due to the mounting political tensions over Ukraine.

The U.S. and European Union have approved a new round of tougher sanctions aimed at hurting Russia's economy over Russian support for Ukrainian rebels.

"The recent trend change in the Russian ruble as well as increasing risks to consumer sentiment and consumer spending from current tensions in the region point to higher risks to the short-term profitability contribution from Russia" and other former Soviet republics, Adidas said in a statement.

Adidas is a sponsor of the World Cup, which is to be held in Russia in 2018. The company said it has decided to "significantly reduce" its store opening plan in the region for this year and next, and to increase the number of store closures.

It said it nevertheless "remains very encouraged by increasing brand momentum" for both the Adidas and Reebok brands.

Adidas runs 1,000 stores in Russia but due to a fall in the value of the ruble and uncertainty in the consumer market there since the start of the Ukraine crisis, the company will now close some of them and open fewer new stores than planned, reports BBC.

Shares in the company plummeted 12.1 percent in Frankfurt trading to 61.63 euros.

Adidas AG, based in Herzogenaurach, Germany, said it now expects net profit of about 650 million euros ($870 million) this year, down from its previous forecast of between 830 and 930 million euros.

Adidas also cited "poor retail sentiment and the slow liquidation of old inventory" worldwide in the golf business as another reason for the profit warning.

It said it would launch a restructuring program at its TaylorMade golf unit, cutting costs "to match lower expectations for the golf industry's development."

Following a strong performance at this year's World Cup and "improving momentum" at its main brands, Adidas would step up marketing investments over the next 18 months, especially in markets such as North America and Western Europe, it said.

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