Adidas Q1 profit jumps despite lagging Reebok

Adidas Q1 profit jumps despite lagging Reebok
Photo: DPA
Adidas, the world's second-biggest sports goods group, reported increased first-quarter profit on Tuesday, but its struggling Reebok brand saw orders fall by 22 percent.

Adidas’ net profit gained 32 percent to €169 million ($262 million) as it cut costs and reaped the benefit of the strong euro-dollar exchange rate in deals with suppliers, a company statement said.

Sales rose by 3.0 percent to €2.62 billion in the three-month period. Shares in the company gained more than 4.0 percent in midday Frankfurt trading on the news.

“We got off to a fast start to 2008,” the statement quoted Adidas chief executive Herbert Hainer as saying. “Adidas and TaylorMade-Adidas Golf were our growth engines.”

But while those brands sold well, Reebok, which Adidas bought in 2005, suffered new problems, with its order book showing a decrease of 22 percent on March 31 compared with the first quarter of 2007.

“At Reebok, we are progressing on plan to reposition the brand,” Hainer said.

Analysts at Merck Finck said they believed Reebok was suffering “from rising sales of own labels by major retailers mainly in the United States and the United Kingdom.”

Order backlog – a key indicator of future sales growth – at the Adidas brand was 13 percent higher than a year earlier however, helped by demand ahead of the European football championship.

Adidas’ main brand will be represented both at this year’s European soccer championship to be held in Austria and in Switzerland, as well as at the Olympic Games in Beijing.

While soccer-related sales are forecast to exceed €1.2 billion as a result, Adidas financial director Robin Stalker told a telephone press conference that “there will be more expenses linked to these events” in the next few quarters.

Shares in Adidas leaped to the top of gainers in midday Frankfurt trades, adding 4.78 percent to €42.33 while the Dax index of blue-chip stocks showed a loss of 0.41 percent overall.

“Adidas reported an excellent first quarter earnings performance which is well above expectations,” analysts at UniCredit wrote in a note to clients.

Hainer predicted meanwhile that Reebok would also soon see a change in fortunes. “There will be an improvement in the second have of the year,” he told the press conference.