Adidas Surges to Highest Since 1995 After Raising Forecast

Adidas AG (ADS), the world’s second- biggest sporting-goods maker, jumped to the highest since the company’s 1995 initial public offering after increasing its profit forecast as first-quarter earnings beat estimates.

The company, which also said today it’s investigating “commercial irregularities” in India, reported a 38 percent gain in first-quarter net income to 289 million euros ($383 million), in a statement brought forward from May 3. Adidas now forecasts 12 percent to 17 percent growth in full-year profit, compared with a previous prediction of 10 percent to 15 percent.

Profit beat the 230.6 million-euro average estimate of five analysts in a Bloomberg survey, fueled by higher golf sales and growth in China, Adidas said. The Herzogenaurach, Germany-based company said it discovered irregularities at the Indian arm of its Reebok unit, which it estimates will cost as much as 125 million euros. It gave no further details of the irregularities.

“I am still nervous about India, but the profit numbers and the guidance are very strong,” said Mark Josefson, an analyst at Silvia Quandt Research GmbH in Frankfurt.

Adidas jumped as much as 6.6 percent in Frankfurt trading, the steepest intraday advance since Sept. 7. The shares were up 4.8 percent at 62.66 euros as of 10:31 a.m.

Photographer: Nelson Ching/Bloomberg

Pedestrians walk past an Adidas AG store in Beijing. Close

Pedestrians walk past an Adidas AG store in Beijing.

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Photographer: Nelson Ching/Bloomberg

Pedestrians walk past an Adidas AG store in Beijing.

First-quarter sales in Asia rose 26 percent on a currency- neutral basis, compared with a 7 percent increase in western Europe, Adidas said. In European emerging-markets and North America, sales climbed 15 percent and 11 percent, respectively. Revenue at Adidas’ TaylorMade golf brand jumped 32 percent.

Sales Forecast

Full-year revenue will rise almost 10 percent, the company predicted, compared with a previous goal for growth of a “mid- to high-single-digit” percentage. Like competitors Nike Inc. (NKE) and Puma SE, Adidas stands to benefit from major sporting events taking place this year such as the European soccer championships in Poland and Ukraine, and the London Olympics.

Adidas also forecast that the operating margin this year will rise to almost 8 percent of sales, even as it faces one- time charges of as much as 70 million euros in the remaining quarters linked to potential restructuring costs in India.

Reebok, which represented about 15 percent of group sales last year, has installed a new management team in India and plans to accelerate restructuring there, Adidas said.

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net

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