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Adidas Net Climbs 6% in Q1

Currency headwinds are blamed for two percent drop in revenues.

BERLIN — Adidas Group improved its profit performance in the first quarter, with net income gaining 6 percent to 308 million euros, or $406.8 million.

This story first appeared in the May 6, 2013 issue of WWD.  Subscribe Today.

Gross margin increased 2.4 percentage points to 50.1 percent, the group’s “highest-ever” quarterly gross margin, which was above 50 percent for only the second time in its history. Adidas cited a positive impact from more favorable pricing, product and regional sales mix as well as a larger share of higher margin retail sales for the development.

The sales picture was impacted by currency effects and particularly strong sales comparisons from the previous year fueled by UEFA Cup and Olympics-related business. Sales slipped 2 percent to 3.75 billion euros, or $4.95 billion, in the three-month period ended March 31.

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On a currency-adjusted basis, sales were flat for the quarter.

The group’s wholesale business was down 5 percent to 2.48 billion euros, or $3.28 billion, while retail sales, driven by both the Adidas and Reebok brands, grew 4 percent to 722 million euros, or $953.7 million.

Dollar figures are converted from euros at average exchange rates for the period in question.

Regionally, greater China posted the strongest sales gains, 6 percent, followed by 4 percent in Latin America, 2 percent in North America and 1 percent in European emerging markets. Sales in the group’s largest market, Western Europe, fell 7 percent, pressured by declines in Spain, Italy and the U.K. Other Asian markets posted a 10 percent drop, dragged down by Japan.

In a conference call, Adidas chief executive officer Herbert Hainer said, “The Adidas brand again came out on top, despite running up against some high numbers in the previous year’s quarter.” Adidas brand sales were up 1 percent, with double-digit growth in all key categories, he said. In the running segment, where sales rose 12 percent, he called the February launch of Energy Boost “the most successful running shoe launch from a commercial standpoint ever. We were almost completely sold through, and presales via e-commerce were up too.”

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As for Reebok, where sales for the quarter were down 14 percent in constant currencies, he said the performance was in line with expectations. He predicted the brand’s return to growth later this year with new footwear product launches during the back-to-school period.

Double-digit sales increases at TaylorMade-adidas Golf drove revenues in the group’s Other Businesses unit up 6 percent for the quarter.

For the year ahead, Adidas confirmed its guidance, which forecasts a midsingle-digit increase in currency-neutral sales, but noted “currency translation is expected to negatively impact top-line development in reported terms.”

Net income attributable to shareholders is expected to reach 890 to 920 million euros, or $1.16 billion to $1.2 billion at current exchange, compared with 791 million euros in 2012. “Despite negative currency translation, we are forecasting a net increase of between 12 and 16 percent, a new record level,” Hainer declared. Improvements in the group’s gross margin, lower other operating expenses as a percentage of sales and more favorable tax rates are expected to propel the group’s earnings momentum.