Adidas fears 09 profit decline despite Q4 surge

GERMANY: Adidas fears 09 profit decline despite Q4 surge

Author: just-style.com | 4 March 2009

Sportswear giant Adidas Group expects sales and profits to fall during 2009 despite posting a 151% surge in fourth quarter profit to EUR54m (US$67.7m).

Gains from the Adidas brand and the company's golf business in all territories except North America drove a strong full-year performance, with sales up 5% to EUR10.8bn and profit beating analyst estimates at EUR642m, up 17%.

Meanwhile, fourth quarter group sales were up 4% on a currency-neutral basis, or up 6% in euro terms to EUR2.574bn.

Higher sales for Adidas were offset by declines for Reebok and TaylorMade/Adidas Golf.

On a currency-neutral basis, fourth quarter sales grew at double-digit rates in Asia and Latin America, while European sales remained static and North America declined.

Gross margins inched down 0.2% to 46.4%. Higher margins for the Adidas brand were more than offset by lower-margin sales for Reebok and for the golf business.

For the full year, Adidas revenues grew 14%, but Reebok declined 2% despite growth in the running category.

TaylorMade/Adidas Golf saw positive sales momentum in apparel, footwear, balls and putters translate into a 7% revenue rise.

By region, full-year revenues were up 11% in Europe, fuelled by success in emerging markets.

Lower sales in the US sent North America sales tumbling 8% on the year, but strong growth in China drove up Asia revenues 20%, and Latin America soared 42%.

Adidas CEO and chairman Herbert Hainer hailed "another record year" for the company.

"This performance is clearly a testament to the underlying strength of our business model - being global, diversified and consumer-focused," he added.

However, the company is forecasting a decline in group sales in the low to mid-single digits in 2009, with gross margins also expected to shrink thanks to increased promotions in mature markets, plus increased sourcing costs. Profits are also set to decline.

Sectors: Apparel, Finance, Footwear

Companies: Adidas, Reebok, TaylorMade