SPORTS> Off the Pitch
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SPORTS> Off the Pitch
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World Cup fervor may bypass markets
(iht.com)
Updated: 2006-06-05 15:27 G ermany plays Costa Rica in Munich on Friday, kicking off the championship that will involve 32 national teams. The audience for the final match will be 1.2 billion, or 17 percent of the world's population, according to the Football Economics Group, a British research company.
Evidence from previous World Cup competitions shows that potential beneficiaries of the competition could see their stocks drop. Shares of DSG International, the British electronics retailer formerly known as Dixons Group, slid 7.5 percent during the 2002 tournament in Japan and South Korea. They lost 5.2 percent during the 1998 Cup in France. Adidas, the maker of sporting goods, dropped 4.6 percent in the last championship and 12 percent four years earlier. A fading feel-good factor "How many people in September will be buying flat-screen TVs and football boots?" asked Richard Batty, global strategist at Standard Life Investments in Edinburgh. "The feel- good factor must be priced in by now." As the event approaches, DSG has fallen 3.9 percent from a four-year high. The stock reached its peak May 10, when the British company reported annual profit that beat analysts' estimates. A day earlier, Adidas reported a 37 percent increase in first-quarter profit, helped by demand for soccer gear. The shares have slumped 10 percent since then. Adidas, based in Herzogenaurach, Germany, makes soccer shirts for teams like Germany and France. Puma's stock has fallen 12 percent from a record high reached May 10. The company, based in the same town as Adidas, raised its full-year profit forecast on April 28 as fans snapped up shirts of the Italian national team. The shares were still up 19 percent this year. William Hill has slipped 4.7 percent from its peak on May 8. The company, based in London, said May 18 that revenue this year would reach a record level of 100 pounds million, or about U.S.$188.16 million, on World Cup bets. The shares have gained 16 percent in 2006. Friedrich Diel of Frankfurt Trust Investment said he was keeping holdings of Puma and Adidas shares on the expectation that a World Cup windfall will send the stocks higher. "Now's not the time to sell," Diel said. "Sports events like the World Cup generate positive sentiment for these companies and the stocks will continue to benefit from that for a while longer." But Wolfram Roddewig, director of European equities at Merrill Lynch Investment Managers in London, said he was reducing holdings of World Cup- related stocks because the shares climbed too high relative to the earnings outlook. "The World Cup is already fully priced into stocks, not leaving much room for fantasy," he said.
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