2nd UPDATE: Adidas Gets China Boost, Raises Outlook
August 04 2011 - 7:49AM
Dow Jones News
Sportswear and equipment maker Adidas AG (ADS.XE) Thursday
raised its outlook for 2011 after strong first-half results driven
by growth in greater China, and as sales declines in Japan were
less severe than expected.
Net profit for the quarter ended June. 30 rose 11% to EUR140
million, just shy of the EUR143 million forecast in a Dow Jones
Newswires poll, while sales increased 5% to EUR3.06 billion, also
just missing analysts' expectations of EUR3.08 billion due to
foreign exchange volatility as a number of currencies weakened
against the euro, and rising commodity prices. On a
currency-neutral basis, sales rose 10%.
"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.
Growth throughout the first-half and in the second-quarter was
driven by strong sales in China and European emerging markets, such
as Russia, as it boosted sales and profits despite the financial
crisis in Europe and the U.S.
Adidas said sales in greater China increased 31%, overcoming
fears among domestic retailers that consumer demand is failing to
keep up with the fast pace of retail expansion in the country.
As a result Adidas, which has already raised its sales outlook
twice this year, said it expects 2011 sales to increase 10% on a
currency neutral basis, with net profit in the range of EUR684
million to EUR652 million. Previously it expected sales to increase
at a high single-digit rate.
The company said it also expects a gross margin of 47.5% to
48.0% compared with 47.8% in 2010 and its operating margin to rise
between 7.5% and 8%.
Still, Adidas, the world's second-largest maker of sports goods
by revenue after Nike Inc. (NKE), said it expects the positive
effects of a strong retail segment and the Reebok brand on the
gross margin to be offset by higher raw material costs and capacity
constraints.
The company also said it now expects the sales decline in Japan
following the earthquake and tsunami to be less severe than the
15%-20% drop it previously expected, although margin pressure is
expected to continue in the country.
"The company currently offers better operating potential than
its peers," Equinet said, noting that although sales were a bit
weaker than expected, the 20 basis points increase in gross margin
was very positive.
At 1116 GMT, Adidas shares traded up 2.2% at EUR49.89.
-By Neetha Mahadevan, Dow Jones Newswires; +49 69 2972 5507;
neetha.mahadevan@dowjones.com
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