Adidas scores profit boost with World Cup

by AFP
9 Aug 2018

German sporting goods firm Adidas on Thursday said the World Cup in Russia and strong e-commerce sales lifted net profit in the second quarter, keeping the company on track to meet its 2018 goals.

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Net profit at the Bavaria-based company more than doubled to 396 million euros ($459 million) between April and June, up from 158 million the previous year.

Group revenues climbed four percent to 5.3 billion euros year-on year, powered by brisk demand in the key North American and Chinese markets as well as by online sales.

A major growth driver in the second quarter was the World Cup football extravaganza, which helped propel a double-digit increase in sales in Russia. As well as supplying the footballs, Adidas sponsored 12 of the 32 teams in the tournament, allowing it to shrug off Germany's embarrassingly early exit.

"We delivered another strong quarter on the back of a successful World Cup activation," said chief executive Kasper Rorsted, pointing to global sales of 10 million footballs and some eight million football shirts.

The group also benefited from higher prices for "top-line" sportswear and sneakers, which helped offset negative currency effects and marketing spending linked to the World Cup. But sales at the group's struggling US sports brand Reebok fell three percent to 387 million euros, despite a major overhaul.

Drafting in Victoria Beckham

Adidas also said it had incurred a one-off charge related to Reebok, after German financial regulators forced the group to make accounting changes to its 2016 financial statement over the value of the Reebok trademark. Rorsted said the group would take a hit of 475 million euros from the impairment charge, but this would not impact the company's 2018 guidance.

Adidas bought the US fitnesswear specialists in 2005 in a bid to narrow the gap with its main rival Nike. But Reebok has struggled to impress at the group, triggering a vast restructuring that includes store closures and a stronger focus on the women's market.

To boost those efforts, Reebok last year announced a partnership with singer-turned-fashion-designer Victoria Beckham. Beckham presented her debut capsule collection for the brand last month, a minimalist line inspired by the 1990s and former basketball superstar Shaquille O'Neal. "We're convinced that she will bring great innovation and creativity," Rorsted told reporters in a conference call.

Rorsted said the Reebok turnaround would take time, but stressed that the group continued to believe in the US subsidiary. "Reebok will be profitable by 2020," he said.

Looking ahead to the full year, the Adidas group still expects a roughly 10-percent increase in worldwide currency-adjusted sales, fuelled by North America and Asia-Pacific.

Investors were impressed with Adidas' performance, sending shares soaring 7.5 percent to 204.80 euros by 1030 GMT in Frankfurt, against a DAX blue-chip index up 0.4 percent. (AFP)

Photos: courtesy of Adidas