PARIS — Thanks to lower marketing expenses and a lower tax rate, Adidas AG said fourth-quarter net profits rose 151 percent, to 54 million euros, or $71.2 million, in the quarter.
This story first appeared in the March 5, 2009 issue of WWD. Subscribe Today.
The world’s second-largest sporting goods maker after Nike Inc. met its full-year 2008 sales and profits targets, but warned sales and profits would decline this year.
Chairman and chief executive Herbert Hainer said 2008 “was a great year, in which we delivered strongly and prepared all our brands for even better performance going forward.” Looking forward, he said: “Consumers will spend less. And that will have a bearing on virtually all consumer goods companies and retailers.”
In the quarter, strong growth at the Adidas brand offset declines at both Reebok and TaylorMade-Adidas Golf to lift group sales 6 percent to 2.57 billion euros, or $3.39 billion. Dollar figures have been converted from euros at average exchange rates.
Clocking up its eighth year of double-digit earnings growth, the group’s full-year net profits beat forecasts to grow 16 percent to 642 million euros, or $944.6 million. That showing came on full-year sales that rose 5 percent to 10.79 billion euros, or $15.89 billion. Apart from North America, all regions generated double-digit growth.
Boosted by an action-packed sporting calendar, Adidas, which celebrates its 60th anniversary this year, grew sales 10 percent to 7.82 billion euros, or $11.5 billion; Tailormade-Adidas Golf inched up 1 percent to 812 million euros, or $1.19 billion, while Reebok continued its downward trend. The brand posted an 8 percent sales decline to 2.15 billion euros, or $3.16 billion.
The company said Reebok has now cleared out most of its old lower-priced stock and hopes upcoming product innovations, such as the partnership with Cirque du Soleil announced last week, will help drive the brand to maintain sales levels in 2009.
However, Hainer warned that ongoing discounting in mature markets plus slowing growth rates in emerging markets, rising raw material and labor costs would impact its 2009 performance. The company is forecasting a low- to midsingle-digit sales decline on a currency-neutral basis. It also expects operating margin and earnings per share to decline this year.
Reflecting the tougher climate, Reebok’s order backlogs at yearend were down 17 percent while backlogs for Adidas were down 6 percent.
Hainer said the group will take a two-fold strategy to tackle the current downturn: Controlling costs while at the same time investing in developing its own retail doors and signing partnerships. “We will not cost-cut our way out of this crisis,” Hainer insisted Wednesday. “I believe the real winners of this crisis will be the ones who remain consistent with their long-term strategies.”
He added the group will continue to prioritize its own retail network with plans to generate 35 percent of revenues through its own stores, shop-in-shops and e-commerce outlets in the coming years, from 18 percent in 2008. Next week, Adidas will unveil a Paris boutique for its new fashion-orientated SLVR label after a New York boutique opened in February.
Adidas share price closed up 0.31 percent on the Frankfurt bourse to 23 euros, or $28.90.