Adidas has been forced to retrospectively tweak its 2016 financial report after an accounting watchdog took issue with the book value of Reebok’s brand, in the latest embarrassment related to the German company’s botched 2006 acquisition of the US sportswear maker.
Adidas on Thursday said it booked an impairment “in the mid-triple digit million euro range” to its 2016 financial results after the Financial Reporting Enforcement Panel concluded that “the historical book value related to the Reebok trademark was not sufficiently proven by the annual impairment test conducted at the time”.
Adidas acquired Reebok in 2006 and since then has been struggling with weak sales and lacklustre profitability at the US division. Chief Executive Kasper Rorsted rebuffed shareholder calls to sell brand and kicked off another restructuring plan. In the second quarter of 2018, Reebok sales fell by 3 per cent due to weak demand for its training and running kit.
“[The] retrospective accounting restatement has no impact on the company’s cash position,” Adidas stressed in a statement, adding that neither its 2018 income and cash flow statements nor its short- and long-term guidance will be affected.
The world’s second largest sportswear maker after Nike confirmed its full-year guidance after beating analysts’ expectations for growth and profits in the second quarter of 2018 as the group increased internet sales and made headway in North America and Asia.
Adidas increased quarterly sales by 4.4 per cent year-on-year to €5.3bn, compared to €5.2 expected by analysts, according to data by S&P Global Market Intelligence. Adjusted for foreign-exchange movements, the increase was 10 per cent.
Operating profit in the three months up to June was 17.2 per cent higher than a year ago and at €592m exceeded analysts' expectations of €546m. Adidas operating margin improved by 1.2 percentage points to 11.3 per cent.
Adidas said it is on track to meet its full-year guidance of 10 per cent revenue growth excluding foreign exchange movements, as sales North America and Asia-Pacific are increasing at double-digit rates. It wants to improve its operating margin to 10.3-10.5 per cent after 9.8 per cent last year.