May 3, 2013 / 5:51 AM / 7 years ago

Adidas profit margin hits record as pricey sneakers fly

FRANKFURT (Reuters) - Germany’s Adidas (ADSGn.DE) posted its highest-ever gross profit margin as the sale of higher-priced products through its own stores and a new running shoe helped offset weak consumer spending in Europe and problems at Reebok.

The Adidas logo is pictured on a shirt during the company's annual news conference in Herzogenaurach March 7, 2013. REUTERS/Michael Dalder

Despite a 2 percent fall in sales in the first quarter, with fewer big sporting events than the year before, operating profit at the world’s second-largest sports apparel maker behind Nike (NKE.N) rose by a greater-than-expected 8 percent to 442 million euros ($578 million).

The group said its new Boost running shoes, priced at around $150 a pair, had almost completely sold out in several countries in the first four weeks of sales and that it was struggling to keep up with demand.

“Unfortunately we don’t have enough supply at the moment,” Chief Executive Herbert Hainer told analysts on Friday.

He said partner BASF (BASFn.DE), the chemical company that developed the shoe’s cushioning foam, would increase production during the year, enabling Adidas to put more of the shoes into shops and launch a similar basketball shoe.

Adidas is hoping Boost will help it gain more customers in the United States, the world’s biggest footwear market. The company, based in the small German town of Herzogenaurach where two brothers formed the Adidas and Puma shoe companies, currently has only 11 to 12 percent of the U.S. market.

Adidas shares jumped 7.5 percent to a record high of 85.63 euros after it said its gross profit margin had widened 2.4 percentage points to 50.1 percent, the second time it has ever reported a figure above 50 percent.


The higher profits overshadowed a slight cut in the sales growth forecast for its Reebok-CCM division, which combines shoe, clothing and fitness brand Reebok and hockey brand CCM. The group now estimates the business will see sales grow by less than 10 percent in 2013.

First-quarter sales at Reebok fell 14 percent on a currency-neutral basis.

Adidas has been grappling with problems at Reebok for over a year and took a 265 million euro write-down on the brand at the end of last year.

Reebok lost a big contract with the National Football League in the United States; fraud was uncovered at its Indian operations; and it was hurt by a lockout by U.S. hockey players at the end of last year.

Hainer said Reebok, which is focusing on sports such as yoga, dance and fitness training, would return to growth this year. It expected a turnaround in the third quarter when the U.S. back to school season starts and students rush to buy new sports gear.

DZ Bank analyst Herbert Sturm described the results as excellent. “The most important news of today is that the Adidas Group is able to deliver margin improvements in a difficult market environment,” he wrote in a note.

Adidas also confirmed its expectations for full-year earnings per share to rise by 12 to 16 percent.

($1 = 0.7649 euros)

Editing by Maria Sheahan and Jane Baird

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