Adidas rebounds after World Cup lifts sales

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Adidas has raised its profit forecasts for the second time this year after a successful football World Cup campaign bolstered a rebound in sales.

Adidas 1st half results
SalesNet profitEarnings per shareDividend
€5.6bn€295m€1.41n/a
↑11%(€13m)(€0.10)n/a

The German company, which vies with US rival Nike for leadership of the sports goods market, announced the increase in expectations after confirming record first-half net income of €295m ($388m) compared with €13m in the same period last year.

As a World Cup sponsor, Adidas provided referees and officials’ kit while also supplying 12 of the 32 teams including the winners, Spain, and Germany, which reached the semi-final. The shirts of Germany, Argentina and Mexico are among the company’s bestsellers. The best-performing team for Nike was Holland, which reached the final.

While some of the star players sponsored by Adidas had poor tournaments, others including Spain’s Iker Casillas and Uruguay’s Diego Forlan won individual awards for their performances. Adidas also got plenty of exposure for its new Jabulani ball that was used in the tournament. The ball was criticised by a host of players for an alleged tendency to swerve unexpectedly.

The interest in the World Cup is set to lift Adidas’s football-related sales to more than €1.5bn this year, surpassing the previous best of €1.3bn in 2008.

Herbert Hainer, chief executive, said in a statement that the growth of Reebok in the US had also contributed to an “outstanding” six months. Reebok, which Adidas has struggled to turn round since it bought the brand in 2005, has shown signs of recovering thanks to shoe sales. Adidas said Reebok’s net sales in the second quarter rose 30 per cent in North America and 16 per cent overall.

The company also said a “more favourable regional earnings mix” had contributed to a much lower tax rate for the period.

Adidas, which gave key details of its quarterly results last month, said it was on track to report earnings per share of between €2.50 and €2.62 this year – equivalent to between approximately €520m and €550m of net income.

At the start of the year it was much more cautious, saying earnings per share could be as low as €1.90. It raised estimates to between €2.05 and €2.30 in April.

First half sales rose 7 per cent on a “currency neutral” basis to €5.6bn, growing everywhere except in China. The gross margin for the quarter increased by 4 percentage points to 48.9 per cent compared with last year, while the operating margin rose from 2.9 per cent to 6.7 per cent. Adidas said group sales on the same basis would increase at a “mid-single-digit rate” for the year.

Adidas shares rose 0.5 per cent to €42.35.

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