Adidas seeks to placate investors with share buyback

Wed Oct 1, 2014 5:52am EDT
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By Emma Thomasson

PARIS (Reuters) - German sportswear maker Adidas, facing investor discontent after a series of profit warnings, plans to return as much as 1.5 billion euros ($1.9 billion) to shareholders over the next three years.

The shareholder return program would be financed mainly from the group's free cash flow, with buybacks to start in the current quarter and be completed by the end of 2017, Adidas said in a statement on Wednesday.

The buybacks would not come at the expense of a planned hike in investment in marketing, an Adidas spokesman added.

The company, struggling to keep pace with larger U.S. rival Nike in the sportswear market, issued its third profit warning in a year in July, blaming a plunge in sales at its golf business and exposure to a weak Russian market.

"This is just a sop for beleaguered shareholders, but does not solve the operational problems at Adidas. Top management seems to be under enormous pressure," said Ingo Speich, a fund manager at Union Investment which is the ninth-biggest investor in Adidas with a 1.2 percent stake.

Chief Executive Herbert Hainer said in August that Adidas had no plans for a share buyback.

Adidas shares, which are down more than a third this year, traded 1.9 percent higher by 0918 GMT, outperforming Germany's blue-chip index, which was 0.2 percent higher.

"Given our group’s strong projected cash flow generation and healthy balance sheet, we have the necessary funding for both reinvestments for growth as well as cash returns to shareholders," a company spokesman said in an emailed comment.   Continued...

Adidas soccer shoes are pictured before the company's news conference in the northern Bavarian town of Herzogenaurach, near Nuremberg in this June 24, 2014 file photo.  REUTERS/Michaela Rehle/Files