It seems that the standoff between Russia and the West is still
far from resolved and has now started hurting the European
companies, even before the fresh sanctions began taking effect.
Although the latest sanctions unveiled by the U.S. and European
Union are targeted on the financial and energy firms, other
industries too have started facing the heat.
Yesterday, the world's second-largest sporting goods company,
) cut its sales and profit forecast for 2014 citing an increasing
risk to consumer sentiments and spending in the Russian market due
to mounting tensions with the West over the Ukraine issue.
Sports equipment maker Adidas unveiled that it now projects
sales for the year to increase in the mid-to-high single-digit
range on a currency neutral basis, down from the previous guidance
range of high-single-digit. Furthermore, profit attributable to the
shareholders is now anticipated to come around €650 million,
significantly lower than the earlier projected range of €830
million to €930 million.
Further, in a move to reduce risk and protect profits in the
Russian market, the company wants to reduce its store opening plan
till next year end. Simultaneously, Adidas intends to speed up its
store closure procedure in the country.
The company has got a huge blow from the recent economic
situation in Russia, as it earns a significant amount of its
revenue from the country. Moreover, Adidas had planned to increase
its namesake and Reebok stores in the region ahead of The FIFA
World Cup 2018 slated to take place in the country.
However, despite facing challenges in the Russian market, the
company has decided to keep up with its growth strategies in rest
of the world, especially in North America and Western Europe. The
company has got a new momentum at its brands after a solid
performance at this year's mega soccer event held in Brazil.
Returning to the Russian economic conditions, we believe the
increasing political tension will influence the outcome of several
companies. Thus, it is best to keep a close watch on those
companies which have high exposure in the Russian market until the
crisis is resolved.
Other Stocks to Consider
Currently, Adidas carries a Zacks Rank #5 (Strong Sell).
However, some better-ranked stocks in the shoe & apparel
related industries are Sketchers USA Inc. (
), Iconix Brand Group, Inc. (
) and Deckers Outdoor Corp. (
). Of these, Skechers holds a Zacks Rank #1 (Strong Buy) while
Iconix Brand and Deckers carries Zacks Rank #2 (Buy).
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