Despite a major boost in visibility, marketing and sales during this summer's World Cup, Adidas reported on Thursday morning that it failed to meet the high expectations it set for itself in the first half of 2014, which ended June 30. While revenue grew 2.4 percent relative to the year prior, to €3.5 billion (about $4.7 billion), net profit dropped 16 percent to €144 million ($193 million), due to a combination of increased marketing spend (hello, World Cup) and lower margins on its golf products and retail business generally.
That's not to say that the last six months have been without their highlights. Thanks to consumers' enthusiasm surrounding the World Cup, sales of the brand's soccer products grew 41 percent. Adidas expects to rake in €2 billion for the category over the course of the year, record numbers for the company. As was the case for Puma, jerseys were a popular item, particularly for the winning German team, Argentina, Mexico and Colombia. In sum, Adidas sold 8 million of the shirts.
Of course, Adidas has been making a play at a more fashion-oriented consumer base as well, and the company reports that Adidas Originals has returned to growth in the second quarter of the year. (We're looking at you, Stan Smiths.) It's an area in which the company is investing heavily: Later this month, Adidas will be releasing an app that allows people to design custom ZX Flux sneakers printed with their favorite Instagram photos, and an Adidas Originals collection with Mary Katrantzou will hit stores in November.
The first of five capsules in the much-hyped Adidas Originals by Rita Ora collaboration is slated to drop August 20. With this unusually long partnership, the brand is clearly hoping that Ora will sprinkle some of her stardust on their sales. To that end, the company notes that it will be increasing marketing spend one percentage point next year.
Adidas execs pointed to Russia as a trouble spot, a result of increased discounting over the summer paired with the devaluation of the Russian ruble. Although the plan was to open 150 stores in Russia over the course of 2014, the company has cut that number to 80.