Adidas earnings up on cost cuts

Adidas AG, the world's second-largest sporting-goods maker, reported a 32 percent increase in first-quarter profit after squeezing suppliers for cost reductions and opening stores under its own brand.

Net income rose to 169 million euros, or 84 cents a share, from 128 million euros, or 63 cents, a year earlier, the Herzogenaurach, Germany-based company said yesterday in an e-mailed statement.

Adidas has been able to demand lower prices from suppliers after buying Reebok International Ltd in 2006. Most purchasing takes place in Asia, helping to keep expenses down as declines by the dollar reduce the cost of buying in dollar-linked currencies. At the same time, that erodes the value of US sales, hampering efforts to revive Reebok's revenue.

"The Reebok purchase has generated synergies for Adidas, but the brand still underperforms," Oliver Caspari, an analyst at Bankhaus Lampe in Dusseldorf, Germany, said by telephone before the figures were released. "It will be interesting to hear more from management about Reebok's future," said Caspari, who advises buying Adidas shares.

Sales increase

First-quarter sales rose 3 percent to 2.62 billion euros and climbed 8 percent under Adidas' own brand. Reebok sales declined 13 percent to 454 million euros and fell 6 percent excluding currency movements. Adidas, which has endorsement contracts with the likes of basketball star Tim Duncan of the San Antonio Spurs, stuck to a forecast for annual cost savings from the takeover.

Adidas rose 3 cents, or 0.1 percent, to 40.40 euros in Frankfurt trading on Monday. The stock has dropped 21 percent this year, more than the 9.6 percent decline by the 20-company Bloomberg Europe Apparel Index.

Orders for Adidas-brand goods climbed 13 percent from a year earlier, excluding currency swings, at the end of the quarter.

Growth was driven by a 13 percent gain in orders for clothes, said the company, which collects revenue when fans buy replicas of the jerseys it supplies to sports clubs and national sides from basketball's Chicago Bulls to New Zealand's rugby All Blacks.

Agencies

(China Daily 05/07/2008 page16)