Adidas plans to overhaul struggling Reebok as profits slow

German sportswear group Adidas said it would take one-off costs to restructure the Reebok brand and invest in its future growth as it reported sales momentum slowed slightly in the third quarter.

New boss Kasper Rorsted, who took over in October, is under pressure to keep up growth and improve profitability after Adidas shares soared two-thirds this year and gained market share from Nike in the United States.

Shares were down 3.7 per cent at 0825 GMT compared to a 0.3 per cent weaker German blue-chip index.

"For the first time in many quarters Adidas reported quarterly numbers that did not beat market expectations. This could cause some short term profit taking," said DZ Bank analyst Herbert Sturm, who rates the stock "hold".

Adidas had previously raised its 2016 outlook four times this year, helped by soaring demand for its Superstar fashion sneakers and Ultra Boost running shoes.

Adidas said it will take unspecified one-time costs due to measures aimed at strengthening future growth, as well as about €30 million ($33 million) for restructuring measures at struggling fitness brand Reebok.

Adidas declined to give further details ahead of a briefing for journalists at 0900 GMT.

Catch up with Nike

Some investors have suggested that Mr Rorsted should consider selling Reebok, which Adidas bought in 2005 to try to catch up with Nike in the US market, but which has weighed on the group’s profitability.

Third-quarter net profit rose 15 per cent to €387 million on sales up 14 per cent to €5.4 billion, compared with average analyst forecasts for €377 million and €5.4 billion respectively.

On a currency neutral basis, sales growth was at 17 per cent, slowing from 21 per cent in the second quarter.

Adidas reiterated a forecast it raised in July for 2016 currency-adjusted sales to grow at a rate in the high teens and for net profit from continuing operations to rise at a rate of between 35 and 39 per cent.

Sales at the core Adidas brand rose 20 per cent on a currency-neutral basis, compared with 7 per cent for Reebok, and 6 per cent for the TaylorMade golf business it is trying to sell.

Adidas continued its recovery in North America, with currency-neutral sales up 20 per cent, though that was down from the 26 per cent growth seen in the second quarter. Both Nike and Under Armour Inc have reported slowing sales in the region.

– (Reuters)