By  on April 26, 2005

NEW YORK — Reebok International Ltd. is beginning to see signs of a turnaround in its apparel business.

In the first quarter ended March 31, worldwide apparel sales grew 13 percent to $279.4 million from $247 million, the athletic giant said Monday.

“During the quarter, U.S. branded apparel gross margins improved as compared with last year’s first quarter,” Kenneth Watchmaker, Reebok’s chief financial officer, said in a conference call with analysts. “This is a result of focusing our efforts for U.S. branded apparel on the quality rather than the quantity of the business, which resulted in improving pricing margins and fewer closeouts.”

The company’s apparel business remains driven by licensed sport products such as team jerseys, sales of which were up in the double-digits, the company said. But, while apparel margins were up over last year, the company said they still weren’t as high as footwear.

The athletic giant’s total income for the three-month period rose 5.2 percent to $43.2 million, or 70 cents a share, from $41.1 million, or 63 cents, and was ahead of analysts’ expectations of 69 cents. Sales grew by 11.2 percent to $925 million, with gains posted across most of its divisions and selling channels.

Sales in the quarter were led by high-technology sneakers, running merchandise, Rbk products and robust sales internationally.

“Our Rbk products and marketing platform, which we launched three years ago, has successfully introduced Reebok in a younger and fresher way,” Watchmaker said on the call. “Many of our new technology products, such as the Pump, contain the Rbk branding.”

Sales also were helped by results of The Hockey Co., which Reebok purchased a year ago, as well as favorable foreign currency exchange fluctuations, said Paul Fireman, Reebok’s chairman and chief executive officer, in a statement.

Reebok brand worldwide sales grew 12 percent to $783 million, while sales in its other divisions, including Greg Norman, Rockport and Ralph Lauren footwear, were up 5 percent to $142 million. Internationally, sales of footwear products grew 22 percent, while apparel gained 11 percent. The company also noted on the call that average selling prices increased internationally, but were down in the domestic market.In the quarter, the company significantly increased its advertising spending on its new integrated campaign, “I Am What I Am,” which is the company’s largest marketing effort in about 10 years and features Reebok-sponsored athletes as well as entertainers such as Jay-Z. This campaign is slated to continue for two years.

Investors reacted well to the results, sending Reebok shares up 61 cents, or 1.45 percent to $42.64 Monday on the New York Stock Exchange.

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