World Cup sponsor Adidas today warned of a “significant” hit to profits this year from collapsing emerging market currencies, including the Russian rouble.
Adidas, whose logos emblazon the shirts of both the Russian and Ukrainian national teams, says sales in emerging markets will grow faster than mature countries. But the German sportswear giant also singled out the woes of the rouble as well as the Argentinian peso, which will hit the euro-denominated earnings of the business.
The fall in Russia’s currency since the turn of the year — exaggerated by the current crisis in the Crimea — means one euro now buys 50 roubles, compared to 45 at the beginning of January. A euro also buys nearly 11 pesos since Argentina’s central bank gave up defending the currency in mid-January, compared with nine two months ago. Less favourable currency hedging terms and higher labour costs will also hinder Adidas this year, the company said.
The warning came despite Adidas, the world’s second-biggest sportswear firm, reporting sales of €3.48 billion (£2.86 billion) for the fourth quarter, 3.3% ahead of a year earlier. But the impact of currency declines in the period cost Adidas 9 percentage points on the top line, according to chief executive Herbert Hainer. This was underlined by sales to emerging European markets, virtually flat at €462 million but up more than 10% before falling currencies are taken into account.
Adidas is focusing on soccer and running as it fights to maintain leadership on its European home turf, with arch-rival Nike gaining market share, although it still expects the World Cup to help sales figures. Signs of easing tensions between Russia and the Ukraine lifted stocks in Asia overnight but failed to inspire traders in London as the FTSE 100 slipped 30.66 points to 6793.11. Gold — traditional bolt-hole of worried investors — eased $2 an ounce to $1335 and yields on safe-haven US, UK and German debt ticked up slightly.
