By Ellen Emmerentze Jervell
FRANKFURT-- Adidas AG's first-quarter net profit rose 8.2% on
the improved performance of the German sporting-goods group's
namesake and Reebok brands, with robust sales in the U.S. and other
markets relieving some pressure on management.
Net profit for the three months to end-March rose to EUR221
million ($246 million) from EUR204 million in the same quarter last
year, slightly below analysts' expectations of EUR234 million.
Adjusted for currency effects, Adidas's first quarter sales rose 9%
to EUR4.08 billion.
The quarter's earnings boost is timely for Adidas Chief
Executive Herbert Hainer.
"I am proud of how fast we rebounded after a challenging 2014,"
Mr. Hainer said. "Our business is in great shape."
Adidas has come under investor pressure since the company issued
a string of profit warnings and had to admit that it wouldn't meet
its financial targets for 2015. Some investors even pushed for the
CEO to quit. Mr. Hainer refused to budge. When confronted with the
company's poor performance and whether he would leave his seat
earlier, he consistently replied that his contract runs until
2017.
Sales in North America, a sore spot for Adidas for many years,
rose 7% on a currency-neutral basis. The company has been
struggling to regain its once-dominant position in the U.S. market,
falling behind newcomer Under Armour to the no. 3 spot in U.S.
retail sales of sports apparel and footwear last fall. In April
last year, Adidas hired company veteran Mark King to turn around
its North American division.
Adidas' new North American strategy includes betting up its
presence in New York and Los Angeles, focusing on U.S. sports and
running marketing campaigns every consecutive quarter for the next
three years. It also said earlier this year that it won't be
renewing its partnership with the National Basketball Association
when its contract expires in 2017.
Adidas reported sales growth in other regions, with growth of
21% in China and 11% in Western Europe.
The black spot was again Russia where the plunge in the value of
the ruble and a shrinking economy have squeezed returns for foreign
companies. Adidas has a strong presence in Russia, where slight
first-quarter sales growth at Reebok was more than offset by a
decrease in Adidas brand sales.
Adidas is currently closing more stores than it is opening in
the region. Total group sales in Russia and other states of the
former Soviet Union fell 3% in the first quarter, when adjusted for
currency swings. In euro terms, sales were down 34%.
Analysts have said they expect the worst hit from the Russian
ruble to be in the first quarter of this year. Adidas otherwise
benefited from the euro's weakness against other major
currencies.
The Reebok brand, which Adidas bought for EUR3 billion in 2006,
reported another quarter of sales growth, up a currency-neutral 9%
on the year. Although struggling to monetize the Reebok acquisition
at first, Adidas has repositioned the former NFL and NBA sponsor as
a fitness brand. Investors have been pushing for Adidas to shed its
Reebok unit and, last year, a consortium of investors said it was
looking to buy the brand. Mr. Hainer declined to comment on the bid
at the time, but said in March that selling Reebok would be
"stupid."
Adidas confirmed its guidance the full year. The company is
slated to hold its yearly shareholder meeting in Fürth, Germany, on
May 7.
Write to Ellen Emmerentze Jervell at ellen.jervell@wsj.com
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