German sportswear company Adidas AG said yesterday the company’s first quarter net profit jumped 32 percent as sales gained 3.1 percent. The company said it was still repositioning the Reebok brand, where sales declined.
The company’s net profit in the January to March quarter rose to 169 million euros (US$261.27 million) compared with 128 million euros a year ago.
Adidas, the world’s No. 2 athletic apparel maker behind Nike Inc, cited the group’s strong operating margin improvement and lower net financial expenses. Additionally, the group’s tax rate decreased by 0.4 percentage points to 32 percent in the first quarter compared to 32.4 percent in the first quarter a year ago.
Sales rose 3.1 percent to 2.62 billion euros in the period compared with 2.54 billion euros in the first quarter of last year.
Investors were buoyed by the results, pushing Adidas shares up more than 5 percent to 42.44 euros in Frankfurt.
Adidas said sales at Adidas increased 14 percent on a currency neutral basis, while TaylorMade-Adidas Golf sales increased 17 percent. Meanwhile, Reebok sales declined 6 percent in the first quarter.
“We are off to a fast start to 2008,” said Herbert Hainer, the company’s chief executive in a statement. “Adidas and TaylorMade-Adidas Golf were our growth engines. As a group, we are stronger than ever before. Most importantly, group profitability has improved substantially.”
Herzogenaurach-based Adidas said its net profit this year was projected to grow by at least 15 percent compared with last year’s 551 million euros. The company said it should see group sales increasing at a high single digit rate on a currency neutral basis, driven by growth in all brands.
Adidas brand sales are expected to grow at a high single digit currency neutral rate for the year, while Reebok is expected to grow at a mid to high single digit rate, the company said.
TaylorMade-Adidas Golf sales are forecast to grow at a mid single digit rate. The company said its gross margin is expected to increase modestly to a range of 47.5 percent to 48 percent driven by improvements in all three brand segments. Operating margin for the Adidas group is projected to increase to at least 9.5 percent, the company said.
Uwe Weinreich, an analyst at UniCredit/HVB in Munich said the company’s first quarter performance was “excellent,” and “well above expectations.”
He said despite slowing momentum on some fronts, the company confirmed its outlook and expressed future optimism.
“We confirm our ‘buy’ rating and our target price of 48.75 euros,” Weinreich said.
Order backlogs for the Adidas brand at the end of the first quarter increased 13 percent compared with last year.
“In 2008 we will reach new heights on both the top and bottom line,” Hainer said. “A summer of excitement is ahead of us.”
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