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Adidas says profits plunge, but plenty to play for
2009-08-05
FRANKFURT (AFP) - German sports equipment group Adidas posted Wednesday a massive drop in second-quarter profit that underscored weak global consumer sentiment, but beat expectations and stood by its full-year outlook. Adidas said net profit in the three months from April to June plunged by 93 percent to nine million euros (13 million dollars) from 116 million in the same period 12 months ago. The earlier figures were boosted by the Euro 2008 football championships and the Beijing Olympics. The latest result, which included a rise in sales of golf equipment, was better than a forecast loss of 2.2 million euros by analysts polled by Dow Jones Newswires, and Adidas shares rose strongly in midday trading. Overall sales in the quarter fell by 2.5 percent to 2.46 billion euros, mainly owing to weak results in Europe, and Adidas maintained its forecast for a drop in full-year sales of between one to five percent. "I believe we have seen the bottom in our financial performance this year," a statement quoted chief executive Herbert Hainer as saying. He added that the figures were exactly in line with a forecast given in May, "if not a little better. "I am confident that our results will improve as we go through the remainder of the year," Hainer stressed. The results by the world's second-biggest sportwear and equipment company after Nike underscored a consumption slump associated with the global recession. On Monday, the German group Metro, the third-biggest general retailer worldwide, reported a 3.8-percent fall in second-quarter sales, and said its full-year result would depend on developments in worsening jobs markets. Across the 16-nation eurozone, retail sales dipped by 0.2 percent in June from May and by 2.4 percent over one year, the European Union's Eurostat data agency said, continuing a downward trend broken only in April. For the first half of 2009, Adidas said net profit fell 95 percent to 13 million euros, on sales that lost two percent to 5.034 billion euros. Adidas has taken a beating as consumer spending worldwide fell owing to rising unemployment and dampened consumer sentiment. It has also been hit by higher material costs, effects from the devaluation of the Russian rouble and promotional costs linked to the 2010 football world cup, the statement said. But Adidas has also almost completed a restructuring programme aimed at achieving 100 million euros in annual savings, Hainer told a press conference. A breakdown of the figures showed that first half sales of the Adidas and Reebok brands fell by three and two percent respectively, but that the TaylorMade-Adidas Golf division turned in an eight percent increase, owing to its acquisition of the Ashworth apparel company. On a geographical basis, "growth in North America and in Latin America was offset by declines in most major European and Asian markets," the group said. Shares in the company leapt by 6.77 percent to 32.49 euros in midday Frankfurt trading, while the DAX index on which they are listed was 0.07 percent higher overall. Analysts said there were few major surprises in the data, but were disappointed by Reebok's chronically weak results.
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