August 5, 2009 / 6:01 AM / in 8 years

UPDATE 5-Adidas Q2 beats estimates, says worst behind it

* Q2 op profit 72 mln eur, above forecast 39 mln

* Reebok brand Q2 op loss 51 mln eur, sales down 9 pct

* Confirms group 2009 outlook, cuts Reebok outlook

* CEO to take charge of global sales too * Adidas shares rise 5.1 percent

(Adds credit market reaction, CFO comment)

By Eva Kuehnen

FRANKFURT, Aug 5 (Reuters) - Adidas AG ADSG.DE, the world’s No. 2 sports goods maker, said it had turned the corner after reporting better-than-expected second-quarter results on Wednesday and kept its 2009 outlook, sending its shares higher.

Adidas’ earnings were weighed down by a wider quarterly loss at its Reebok brand, which is unlikely to come out of the red this year, Adidas said.

It said it still expects 2009 group margins, net income and earnings per share to decline due to higher operating costs and sees group sales down by a mid-single-digit rate.

Data showed earlier euro zone retail sales fell unexpectedly in June, posing a question mark over how quickly the economy will emerge from recession. [ID:nL5259067]

“Although there are still challenges ahead, I am confident that our results will improve as we go through the remainder of the year,” said Chief Executive Herbert Hainer. “I believe we have seen the bottom in our financial performance this year.”

The firm’s U.S. arch-rival, world no. 1 Nike, gave a less rosy outlook in June, reporting a worse-than-expected global decline in forward orders and warning analysts 2010 would be challenging. [ID:nN24223907]

Adidas shares jumped 5.1 percent to 31.98 euros by 1434 GMT, ranging among the top gainers in Germany's blue-chip DAX index .GDAXI, which was down 1.3 percent. Shares in Puma (PUMG.DE), the runner-up to Nike and Adidas, were up 3.5 percent.

“This is more reassurance. The company considers the first-half as the bottom and there were no bad surprises after an ugly first quarter,” said Kepler Capital Markets analyst Cedric Lecasble, who has a “buy” rating on the stock.

The Adidas 2.5 percent euro bond due 2015 rose around 4 percentage points to 132.5 percent of par.


A triple whammy of less stock bought by retailers, currency fluctuations and spending-averse customers around the world has hit the major sports footwear brands, which are responding by cutting costs.

Adidas aims to save more than 100 million euros from 2010.

Restructuring efforts are already paying off and will -- along with lower input costs -- lead to a more profitable second half of the year, CEO Hainer said, though full-year results would still come in below last year‘s.

Adidas’s second-quarter operating profit fell 65.5 percent to 72 million euros ($103.6 million) on sales of 2.5 billion euros, down 2.5 percent. Both figures beat the average estimates in a Reuters analyst poll of 39 million and 2.4 billion respectively.

Losses at Reebok, which Adidas bought in 2006 to complement its strength in classic sportswear and to compete against Nike, widened to 51 million euros from 11 million last year.

Adidas lowered its 2009 outlook for the brand and now expects sales to fall up to a mid-single digit rate, having earlier aimed for an at least stable performance.

CEO Hainer said sales trends at Reebok’s women’s fitness line were promising and that there was “no doubt that Reebok will be an important part of our group going forward”.

Reebok is unlikely to post a 2009 profit, Chief Financial Officer Robin Stalker said, adding he aimed to get there as soon as possible. “We are not running this as a charity.”

Adidas shares trade at 13.5 times 12-month forward earnings, at a discount to Nike, which trades at a multiple of about 16, as investors remain wary of Reebok’s weak performance.

($1=.6949 Euro)

Additional reporting by Christian Kraemer in Munich and Jane Baird and Natalie Harrison in London; editing by David Cowell

Our Standards:The Thomson Reuters Trust Principles.
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