Adidas slumps as retro shoes wane on European home turf

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(iStock)
(iStock)

Adidas fell the most since May after the company said it expects sales growth to slow this year, with the retro footwear boom losing momentum on the company’s European home turf.

The German sportswear maker got a boost in recent years from reissues of Stan Smith tennis shoes and Superstar basketball kicks. As sales of those models ease, Kanye West’s Yeezy line, which became more widely available in late 2018, has not yet taken over the baton.

Sales growth this year will be as much as 3 percentage points behind 2018’s 8%, the company said on Wednesday. Adidas is facing growing momentum from arch-rival Nike, which is benefiting from a raft of hot-selling new products, including a women’s footwear line that surged in late 2018.

The outlook "will not inspire the market" since Adidas expects the first half of 2019 to be especially slow, Joerg Philipp Frey of Warburg Research said in a note.

Adidas fell as much as 6% in Frankfurt.

The company’s challenges are most apparent in Europe, which accounted for about 23% of sales in the fourth quarter and slumped overall in 2018. Adidas expects to see a "slight increase" in sales this year, adjusted for currency swings. To achieve that, it needs to boost its sports business in a region where the Originals line and other fashion-focused items account for about half of revenue, compared with about one-third globally.

Sports line

"We need to drive a stronger sports channel in Europe," Chief Executive Officer Kasper Rorsted said in an interview on Bloomberg TV. "We can turn it around. It’s very much in our own destiny."

More challenges loom in North America, where business has boomed in recent years. Supply shortages there will prevent Adidas from meeting demand for mid-priced apparel, reducing the company’s overall growth rate by 1 to 2 percentage points and leading to a particularly slow first half of 2019, Rorsted said.

The bright spot is the Asia-Pacific region, where sales are expected to grow again at a double-digit rate. Rorsted has cited the region as a reason for optimism, saying that the Chinese market is growing so fast - despite concerns about the country’s economy - that it can support increasing sales at both Adidas and Nike.

Adidas proposed a dividend of €3.35 a share for last year, surpassing the average analyst estimate. The company also plans to buy back €800m of shares this year. It confirmed its previously outlined 2020 financial targets.

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