GERMANY: Adidas eyes improvement as Q2 profit crashes 93%
Widespread revenue declines sent second quarter profits at Adidas crashing by 93%, but the company is scenting an improvement in the second half of the fiscal year.
In reported terms, revenues fell 3% to EUR2.457bn (US$3.5bn), but the company benefited from foreign exchange gains.
Revenues on a currency neutral basis were down 9%, it said.
For the Adidas brand, growth in North America and Latin America was offset by declines across Europe and Asia, leading to a 9% revenue decline on a currency neutral basis.
Reebok sales fell 9%, but TaylorMade-Adidas Golf revenues were up 3%, boosted by the consolidation of the Ashworth business.
Higher input costs and currency devaluation effects, especially for the rouble, led to a 5.1 percentage point decline in gross margin to 45%.
Gross profit fell 13% to EUR1.105bn. Operating profit was down 66% to EUR72m, while net profit plummeted 93% to EUR9m, Adidas said.
"The impacts of the economic downturn and repercussions on consumer spending are well-documented and certainly continued to influence our performance in the second quarter," said Adidas Group chairman and CEO Herbert Hainer.
"However, the good news is that we did not see any fundamental deterioration in our business since publishing our first quarter results.
"Our financials for the first half of 2009 are exactly in line with the guidance we provided in May - if not a little better. As a result, I believe we have seen the bottom in our financial performance this year."
First half group revenues were down 2% to EUR5.034bn, with all divisions showing a currency neutral sales decline: Adidas down 8%, Reebok 6% and TaylorMade-Adidas Golf 1%.
There were first half sales declines in all regions bar Latin America, which benefited from new Reebok companies in Brazil/Paraguay and Argentina, and posted a 16% revenue hike.
First half operating profit for the group was down 74% to EUR129m, and net profit plunged 95% to EUR13m.
Adidas said it expected earnings per share to improve during the second half of the year, but still to fall short of last year's figures.
"Although there are still challenges ahead, I am confident that our results will improve as we go through the remainder of the year," said Hainer.
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