UPDATE: Adidas Profit Up, Raises 2011 Outlook
August 04 2011 - 3:12AM
Dow Jones News
Sportswear and equipment maker Adidas AG (ADS.XE) Thursday
raised its outlook for 2011 after profit and sales increased in the
first half driven by growth in China and European emerging
markets.
"High exposure to fast-growing emerging markets, the further
expansion of retail as well as continued momentum at all key brands
will more than offset the non-recurrence of sales related to the
2010 FIFA World Cup," the company said in a statement.
Adidas, the world's second-largest maker of sports goods by
revenue after Nike Inc. (NKE), expects 2011 sales to increase 10%
on a currency neutral basis, while net profit is expected in the
range of EUR684 million to EUR652 million for the year. Previously
it expected sales to increase at a high single-digit rate.
The company expects earnings per share to increase to a level
between EUR3.10 and EUR3.12, up from its previous outlook of
EUR2.98 to EUR3.12, and a gross margin of 47.5% to 48.0% compared
with 47.8% in 2010. Meanwhile, it continues to expect operating
margin to rise between 7.5% and 8%.
Still, the company said it expects the positive effects of a
strong retail segment and the Reebok brand on the gross margin to
be offset by rise in sourcing costs due to higher raw material
costs and capacity constraints. Additionally, gross margin will be
partly hurt by a decline in sales in Japan after the disaster there
during the first quarter.
Net profit for the quarter ended June. 30 rose 11% to EUR140
million from EUR126 million, just shy of the EUR143 million
forecast in a Dow Jones Newswires poll.
Sales increased 5% to EUR3.06 billion, missing analysts'
expectations of EUR3.08 billion due to currency effects. On a
currency-neutral basis, they rose 10%.
Sales in greater China increased 31%, despite fears among
domestic retailers that consumer demand is failing to keep up with
the fast pace of retail expansion in the country. But international
brands appear to be avoiding the fallout so far, with Adidas' U.S.
rival Nike last month reporting a 16% rise in fourth-quarter sales
from Greater China.
However, recent profit warnings from Chinese labels Li Ning Co.
(LNNGY) and Dongxiang Group (CDGXY) sounded a note of caution for
the whole market.
Since the start of the year, Adidas shares have dropped around
13% of their value, compared to the Euro STOXX Consumer goods
index, which lost about 8% as growing consumer pessimism across
Europe hit retail stocks. They closed Wednesday at EUR48.84.
-By Neetha Mahadevan, Dow Jones Newswires; +49 69 2972 5507;
neetha.mahadevan@dowjones.com
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