GERMANY: Adidas Q1 profit climbs despite Reebok slump
Sporting goods giant Adidas has reported a 32% leap in first quarter net income to EUR169m (US$262.2m), reporting revenue growth in all units except Reebok.
The income growth was attributed to better operating margins and lower net financial expenses.
Currency-neutral sales in its Reebok segment decreased 6% in the first quarter, mainly as a result of Reebok's repositioning in the US and UK markets, the company said.
However, the group's Adidas and TaylorMade-Adidas Golf segments set the pace for sales growth in the first quarter of 2008.
Currency-neutral Adidas segment revenues increased 14% during the first three months, while TaylorMade-Adidas Golf currency-neutral revenues increased 17% - helped by several new product launches.
Adidas said that currency translation effects negatively impacted sales in all segments in Euro terms, with Adidas sales up 8% to EUR1.968bn, Reebok down 13% to EUR454m and TaylorMade-Adidas Golf up 6% in these terms.
Overall group sales increased 10% on a currency-neutral basis and 3% in Euro terms to EUR2.621bn.
"We are off to a fast start to 2008," said Adidas CEO and chairman Herbert Hainer.
"Adidas and TaylorMade-Adidas Golf were our growth engines. At Reebok, we are progressing on plan to reposition the brand. As a group, we are stronger than ever before. Most importantly, group profitability has improved substantially."
Adidas' first quarter group sales grew 12% in Europe, but declined by 7% in North America due to lower Adidas and Reebok sales in the US and Canada.
Sales for the Adidas Group in Asia increased 25% on a currency-neutral basis in the first quarter, driven by particularly strong growth in China and Korea. In Latin America, currency-neutral sales grew 18% in the first quarter.
The company said that currency-neutral Reebok backlogs fell 13% at the end of the first quarter versus the prior year, with apparel backlogs down 12%.
In its outlook for 2008, Adidas projected high-single-digit currency-neutral sales growth, with revenues in the Reebok segment expected to grow at a mid- to high-single-digit rate.
It said targets were raised in March following a joint venture with Vulcabras SA in Brazil and Paraguay to distribute Reebok footwear, apparel and accessories.
Hainer added: "In 2008, we will reach new heights on both the top and bottom line. A summer of excitement is ahead of us.
"Our brands will be front and centre at the two major sporting events, the UEFA Euro 2008 and the Olympic Games. Despite a challenging market environment, we are optimistic we will achieve all our targets."
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