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Adidas outlook disappoints in Olympic year

Mar 07 2012 15:06 Reuters

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Frankfurt - German sportswear group Adidas stuck to forecasts for a slowdown in sales growth in 2012, disappointing investors who had hoped for more in a banner year for sports events with the Olympics and European soccer championships.

The company said on Wednesday sales growth would slow to 5-9% on a currency-neutral basis from the 13% reported for 2011. Analysts described this as a cautious move from a company that upgraded forecasts four times in 2011.

Smaller German rival Puma, controlled by French luxury goods group PPR, said last month it expected a near 10% rise in group sales for 2012, while Nike in December said future orders were up 13%.

“2012 guidance is seen as a little low - it is below Puma guidance and below Nike order backlogs,” Silvia Quandt analyst Mark Josefson said.

Adidas, the world’s second-largest sporting goods group behind Nike, grew sales and earnings to record levels in 2011, as consumers in China and Eastern Europe flocked to buy its three-stripe products.

The three big sports brands have enjoyed strong growth over the last year, as fashion-conscious Chinese and Russian consumers snap up big brands and running fans stock up on the latest high-tech products in the United States.

European soccer and Olympics

In 2012, the big sportswear brands are courting soccer fans ahead of the UEFA European championships in Poland and Ukraine that start in June.

Adidas is an official sponsor of the tournament and also supplies kit to European and world champions Spain as well as Germany, another of the tournament favourites.

It has previously said it expects record soccer sales of over €1.5bn. Rival Puma is stepping up investments, signing deals with players such as Barcelona’s Cesc Fabregas, and the Italian soccer federation.

Analyst Chris Walker of Nomura said Adidas’ gross margins were slightly lower in the fourth quarter and noted that the stock had enjoyed a strong run.

“It’s probably more that expectations were elevated,” he said of the share price reaction.

“The full-year results were in line with expectations and broadly in line with company guidance,” said Walker, who rates the stock a “buy”.

“It’s an exciting year for the company. They will probably have to weight more of their marketing spend to the early quarters to get maximum benefit,” he said.

Adidas is a sponsor of the London Olympics and is supplying kit to the host nation, Team GB.

Adidas, which also owns the Reebok brand, confirmed a forecast for earnings per share to rise by between 10% and 15% to around €3.52-3.68 in 2012, equivalent to net income of €736-770m.

The group reported 2011 sales of €13.3bn and operating profit of €1.01bn, in line with expectations in a Reuters poll.

Adidas itself had predicted a near 12% rise in sales in November, the fourth time it increased its sales outlook for 2011.
puma  |  adidas  |  nike  |  olympics 2012  |  european soccer



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