Adidas AG said Monday that it had surpassed market expectations with a 38 percent spike in first-quarter net profits and has increased its financial outlook for the year.
This story first appeared in the May 1, 2012 issue of WWD. Subscribe Today.
The world’s second-largest sporting goods manufacturer after Nike Inc. registered preliminary net income of 289 million euros, or $378.4 million, in the three months ended March 31.
Boosted by increases in all regions and segments — particularly in Greater China and Japan as well as from the TaylorMade-Adidas Golf brand — group sales in the period gained 17 percent to 3.8 billion euros, or $4.97 billion.
Dollar figures are converted at average exchange rates for the periods to which they refer.
The Herzogenaurach, Germany-based company raised its guidance for 2012, when sales are expected to increase almost 10 percent on a currency-neutral basis. Formerly, the growth was estimated in the mid- to high-single digits.
“Our first-quarter performance confirms the outstanding brand momentum and global power of the Adidas Group,” said Herbert Hainer, the company’s chief executive officer. “Our investments in brands and channels are yielding an unprecedented period of growth for the group, as we continue to excite consumers and customers with the ultimate in product and brand experiences.”
The first-quarter numbers follow an already strong 2011. In March, during the presentation of Adidas’s fourth-quarter and full-year sales, Hainer heralded 2011 as “the best year in the history of our company.”
Adidas’ results should put further pressure on local sporting goods competitor Puma SE, which is owned by French retail-to-luxury group PPR, to shape up its act following a disappointing performance in the first quarter of 2012 that was impacted by the sluggish European economy. Puma reported a 4.9 percent drop in income in the period to 73.9 million euros, or $96.8 million.
PPR chairman and chief executive officer François-Henri Pinault at PPR’s annual general meeting on Friday expressed confidence that Puma would meet its target of 4 billion euros, or $5.3 billion, in sales by 2015.
“I promise you that things are going to shift in the right direction,” he said.
Western Europe — Adidas’ weakest link in terms of currency-neutral, first-quarter regional sales — posted 7 percent growth. Leading the pack were China and other Asian markets, which together reported a 26 percent revenue jump. Sales rose by 15 percent in European emerging markets; by 14 percent in Latin America, and by 11 percent in North America.
Adidas expects commercial irregularities discovered in its Reebok India Co. will negatively impact the company’s consolidated financial statements this year. It estimates a pretax negative impact of up to 125 million euros, or $165.5 million at current exchange. A new local leadership team was installed in India at the end of March.
By brand, Adidas saw double-digit growth in all regions and most major categories, with a 16 percent sales increase on a currency-neutral basis. TaylorMade-Adidas Golf’s sales rose 32 percent, fueled by significant growth and market share gains in metal woods and irons, the company said. Reebok’s 7 percent revenue decline was attributed to the transfer of sales to the Reebok-CCM Hockey segment.
Adidas will hold a conference call Thursday, when it is to confirm its quarterly numbers and guidance for full-year 2012.