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May 4, 2010
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Adidas gets a kick out of FIFA World Cup and Reebok

By
Reuters
Published
May 4, 2010

By Eva Kuehnen

FRANKFURT (Reuters) - German sporting goods maker Adidas raised its full-year outlook on Tuesday 4 May as the upcoming soccer World Cup pushes sales and the turnaround of its Reebok brand shapes up on strong demand for toning shoes.


Reebok's ATR - Photo: www.reebok.com

The world's No. 2 behind U.S. bellwether Nike now expects 2010 sales to rise by a mid-single digit percentage rate and aims for higher margins.

Adidas already surprised markets last month by raising its 2010 net profit outlook and reporting better-than-expected first-quarter results ahead of schedule.

Its shares, which have risen about 13 percent in the past four weeks, fell 1.4 percent to 44.59 euros by 1138 GMT in a weak market. "There were no big surprises. This was a call that added up," said Commerzbank analyst Christian Dolleschal.

"All that investors were still waiting for were details on segment and regional performance and that was in line with peers and the overall economic development -- sales recovered faster in the United States than in Europe," he added.

Reebok's EasyTone shoe boosted sales in North America, which rose 14.3 percent, while demand for soccer jerseys, shoes and match balls in the run-up to the FIFA World Cup in South Africa in June pushed soccer sales up 26 percent in the first quarter.

"With the Reebok turnaround gathering pace and the FIFA World Cup kicking off in a few weeks, we have a lot of reasons to be optimistic," Chief Executive Herbert Hainer said.

Adidas had initially aimed for a low- to mid-single-digit percentage rate rise in 2010 sales with a gross margin of 46 to 47 percent compared to 45.4 percent last year.

RAY OF HOPE

Adidas leads the pack in soccer. For the World Cup, it provides the official match balls, dresses tournament officials such as referees, and equips 12 teams, including Germany, host nation South Africa and European champion Spain.

Nike sponsors 10 teams and Puma seven.

The World Cup is ray of hope for Adidas and its peers after their sales were hit hard by the recession last year. Hainer said that a recovery in consumer spending was gaining traction in many regions and was definitely encouraging.

"I see light at the end of the tunnel for consumption around Europe," Hainer said, adding that business in Germany and Britain was doing very well. "Therefore I don't worry too much."

But "there are still clouds" over the market, he said with regards to the debt crisis in Greece and rising unemployment in Spain. "Not everything is shiny. We definitely still have to be careful how it develops," Hainer added.

Data showed on Tuesday 4 May that retail sales in Germany -- Europe's biggest economy -- declined unexpectedly in March, falling for two of the first three months of the year and acting as a drag on growth over the period.

Adidas shares trade at 17.4 times 12-month forward earnings, in line with Nike, which trades at a multiple of 17.6, according to Thomson Reuters StarMine, which weights analyst expectations according to their track record.

Puma trades at 15.4 times, a discount to both companies.

(Editing by Rupert Winchester, Mike Nesbit)

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