Adidas AG (ADDYY) shares fell to the bottom of the German DAX Wednesday after the sportswear giant trimmed it full year revenue outlook after disappointing third quarter sales in its key European market as rivals Nike (NKE) - Get Report and Puma (PUMSY) continue to challenge its home court dominance.
Adidas said operating earnings for the three months ending in September jumped 19% from the same period last year to €656 million ($752 million), topping analysts' forecasts, as rose 8% to €5.87 billion. However, Adidas said full year sales would rise between 8% and 9%, a reduction from the previous 10% forecast, even as it guided for better-than-expected earnings growth of as much as 20%, a move that would take its 2018 bottom line to as high as €1.72 billion.
"Some of our launches in Western Europe have not worked to the extent that we wanted, and there is no doubt that the European economy has been more impacted (by events) than any other in the world," CEO Kasper Rorsted told CNBC television Wednesday. "The Brexit decision is perhaps the most unwise we've seen in the past thirty years and that is also affecting consumer spending in Europe."
Adidas shares were marked 3.7% lower in the opening hour of trading in Frankfurt, falling to the bottom of the DAX performance index and changing hands at €198.20 each, a move that trims the stock's year-to-date gain to around 15%.
Western European sales, which rose 17% in 2017, have been largely flat this year, as its Reebok unit continues to underperform with a 5% fall in revenues 5% "as double-digit growth in Classics was more than offset by declines in Training and Running," the company said.
Overall Western European sales for the third quarter fell 1.3% to €1,645 billion, Adidas said, while Nike's Europe, Middle East and Africa sales rose 11% over its first quarter, which ended it August, to just over $2.6 billion.
Adidas' gross margin, a key metric for profitability, rose 1.4 percentage points to 51.8% thanks to "an improved pricing, channel and category mix ... as well as lower sourcing costs."
Nike said in September that its first quarter gross margin , improved by 50 basis points to 44.2%, noting that selling and administrative expenses rose 7% to just over $3.1 billion.
Nike CFO Andy Campion said the group sees revenue growth in "the high single digits, albeit at the lower end of that range as operational upside will likely be somewhat offset by FX headwinds" for the 2019 fiscal year.
Nike shares were marked 0.4% higher in pre-market trading Wednesday, indicating an opening bell price of $76.90 and a year-to-date advance of around 23%.