Adidas ups 2012 goals as it trumps rivals in China
FRANKFURT, April 30 – Adidas, the world’s second-biggest sporting goods company, raised its 2012 profit forecast after outperforming rivals Nike and Puma in the key Chinese market as shoppers there snapped up its trademark three-stripe sneakers.
Adidas shares jumped to a record-high on the news, as investors brushed aside the German company’s warning that “commercial irregularities” at its Reebok unit in India could cost it almost €200 million (RM1.07 billion).
In an unscheduled announcement to update investors on its new expectations as well as the problems in India, Adidas said sales in China soared 26 per cent on a currency-neutral basis in the first quarter, helping it to top sales and profit forecasts.
Smaller rival Puma last week missed first-quarter earnings forecasts, citing “mediocre” results in China and caution among austerity-hit European shoppers.
Nike, the world’s No.1 sporting goods company, last month reported a currency-neutral 21 per cent rise in Chinese sales for its third-quarter to end-February.
Silvia Quandt analyst Mark Josefson said the sales rise for Adidas in China suggested the “problems seen by competitors in the region were partly caused by the strength of Adidas.”
Adidas said it now expects sales to rise in 2012 by nearly 10 per cent, up from a previous forecast of 5-9 per cent, while net earnings would grow by between 12 and 17 per cent, compared to previous guidance of 10-15 per cent.
Shares in Adidas, which have already gained 19 per cent this year, jumped over 6 per cent in early trade to an all-time high of €63.75.
The improved outlook and strong results outweighed news of irregularities at Reebok India, where Adidas said it had already replaced management, bringing in 14-year Adidas veteran Claus Heckerott and Frederic Serrant.
A spokeswoman declined to give further details on the irregularities.
Adidas said the situation could result in a pretax impact of up to €125 million on previous results, while further restructuring there could cost up to €70 million in 2012.
The new 2012 outlook includes any charges related to Reebok India, it added.
“The situation in India, although unfortunate, will allow us to now accelerate plans to improve a specific underperforming part of our business,” Chief Executive Herbert Hainer said in a statement.
While India is not one of Adidas’ top 10 markets, its Reebok brand is big in cricket and is the market leader in the country.
Adidas, which will release its full first-quarter report on Thursday, reported first-quarter sales of €3.8 billion, operating profit of €409 million and net income of €289 million.
Analysts had been expecting Adidas to report sales of €3.59 billion, operating profit of €332 million and net income of €232 million, according to Thomson Reuters I/B/E/S. – Reuters