PARIS — Citing a recovery in North American sales and a 35.8 percent rise in second-quarter profits, Adidas-Salomon AG on Wednesday raised its full-year earnings target by more than five points to 20 percent for the full year.
The Herzogenaurach, Germany-based activewear giant also said a strong trading climate, particularly in Asia and Latin America, should fuel revenue growth of about 5 percent this year on a constant-currency basis.
“2004 will be a record year for Adidas-Salomon,” Herbert Hainer, chairman and chief executive officer, said during a brisk conference call Wednesday to discuss the results, which bested analysts’ expectations.
Hainer also said major sporting events like the recent European soccer championships in Portugal and the upcoming Olympic Games in Athens are fueling demand, especially in its core European market. Almost half the athletes competing in the Games this month will wear the Adidas brand, he noted.
For the quarter ended June 30, the group’s net income sprinted ahead 35.8 percent to 44 million euros, or 96 euro cents a share, compared with 32 million euros, or 71 euro cents, a year ago. In dollars, earnings were $53 million, or $1.16, versus $36.4 million, or 81 cents. Euros have been converted at average exchange rates for the corresponding periods.
Group sales in the period were up 5.5 percent to 1.47 billion euros, or $1.77 billion, from 1.39 billion euros, or $1.58 billion, a year ago. Excluding the impact of currency exchange, sales would have gained 7 percent.
The North American market, which has been the company’s Achilles’ heel, reported currency-neutral sales for the second quarter being up 4 percent, the region’s first positive performance in a year. Adidas said it expects a positive performance in that market for the full year.
Meanwhile, order backlogs grew 8 percent in the second quarter, reflecting improvement in all regions. Overall apparel orders rose 17 percent.
For the half, net income increased 38.9 percent to 116 million euros, or $142.3 million, from 83 million euros, or $91.7 million, during the same period in 2003. Sales in the half inched up 1 percent to 3.09 billion euros, or $3.79 billion, from 3.06 billion euros, or $3.38 billion, a year ago. At constant currency, sales would have increased 5 percent.
This story first appeared in the August 5, 2004 issue of WWD. Subscribe Today.
“This is the strongest first-half-year performance in the group’s history,” Hainer said in a statement.
Gross margins reached 47.1 percent in the half, up 3.6 points since the start of the year.
Adidas shares rose 4.9 percent Wednesday to close at 105.41 euros, or $127 at current exchange, on Germany’s DAX.