Adidas score big thanks to World Cup

GERMAN sporting goods firm Adidas reported a better-than-forecast 24% rise in second-quarter net profit on Wednesday on the back of a surge in sales spurred by the soccer World Cup.

Adidas, the second-largest sporting goods firm after US giant Nike, said in a statement net profit attributable to shareholders rose to €82 million, despite higher marketing expenses for the World Cup.

Analysts polled by Reuters had expected net profit of €74m, but individual forecasts had been in a wide range, reflecting uncertainty over the costs of World Cup marketing and the effects of a revamp at its Reebok unit.

Adidas had launched a record sales campaign for the World Cup to defend its position as market leader for soccer boots against increasing competition from Nike and arch-rival Puma.

As a result, quarterly sales jumped 60% to €2.42 billion, with growth coming from all regions, including the tough European market.

For the full year, Adidas reaffirmed that it expected double-digit percentage profit growth, with net income approaching €500m in 2006.

Adidas also increased its forecast for currency-neutral sales growth, excluding Reebok, to 10-12% after earlier expecting a high single-digit percentage growth rate.

“In light of our strong performance in the first half of the year, we are confident that we will achieve our ambitious full-year targets,” chief executive Herbert Hainer said.

Despite recent losses after markets became choppy in May, Adidas shares are still more expensive than Nike stock in terms of price to earnings multiples. According to Reuters Estimates, Adidas shares trade at nearly 15 times 2006 forecast earnings, while Nike is at 14 and Puma almost 17.

Order backlogs for the key Adidas brand were up 6% at the end of the quarter compared with a year ago.

But Reebok saw orders decline by 16%, which Adidas mainly blamed on a weak footwear business and a transfer of the licence sales rights for the US basketball league NBA to Adidas.

Adidas bought Reebok for $3.8bn to take on Nike but has launched a revamp to tackle falling orders. While Adidas said Reebok would help improve 2006 group earnings, analysts are split whether the US acquisition will pay off.

Despite a surge in sales of soccer gear, Adidas suffered a defeat at the World Cup at the hands of Puma, which for the first time backed a champion with its sponsorship of Italy. Adidas had fewer teams than Puma and Nike in the tournament.