Adidas struggles on home turf as Nike muscles in
In recent years, the Herzogenaurach, Germany-based company shifted talent and resources to North America, where the lion's share of global sportswear sales are made. But while doing so, it took its eye of the ball on its home turf.
Adidas Chief Executive Kasper Rorsted said the company had focused too much on its athletic-style brand, Originals, in Western Europe and was too slow in reacting to a consumer shift toward sport apparel and footwear.
"We didn't react quickly enough to trends in the market," Mr. Kasper told reporters. "We are acting on the situation in Western Europe now."
Adidas in the summer said it was having some trouble in the region, and made management changes at the time. Mr. Rorsted said Wednesday he didn't anticipate any further management changes in Europe to address the slowdown.
Shares of Adidas fell about 2% in early afternoon trading.
Mr. Kasper said Adidas should have been faster in developing sports-performance gear, as it has done in the U.S.
Another reason for the slower growth in Western Europe, Mr. Kasper said, was that Adidas had charged too much for some of its products. The company is now working to adjust prices on some products, though not across the range.
Adidas's slowdown at home comes as rivals have gotten more aggressive in the region. Beaverton, Ore.-based Nike, the global leader in sportswear sales, reported a 9% rise in sales in Western Europe to $2.6 billion in the most recent quarter.
On an analyst call this summer, Nike Chief Executive Mark Parker said the company is "overindexing" on Europe and is focusing on releasing specific products in targeted cities in the region.
Adidas said it now expects full-year sales to rise between 8% and 9%, compared with previous estimate of 10%. For the three-month period ended in September, sales in Western Europe fell 1.5% to EUR1.65 billion, extending a streak of weaker results in the region.
The weak performance comes despite 2018 being a World Cup year. Adidas is a global sponsor of the soccer tournament, which has traditionally boosted sales in Europe.
But it performed better in other regions. Adidas reported a 25% rise in third-quarter net profit to EUR658 million, compared with EUR526 million in the same period last year. Group revenue rose 3.5% to EUR5.9 billion, boosted by gains in North America and Greater China.
The company's gross margin rose to 51.8% in the quarter from 50.4% a year ago.
Adidas also raised its full-year profit guidance, saying it now expects 2018 net income from continuing operations to reach between EUR1.66 billion and EUR1.72 billion, compared with its previous forecast of EUR1.62 billion to EUR1.68 billion.
The new guidance would make for a 16% to 20% rise on last year's profit.