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Adidas Rises After Forecasting Higher Profit, Sales for Year

Adidas Rises After Forecasting Higher Profit for Year
The Adidas AG company logo is displayed on the heels of handmade leather soccer shoes at the company's factory in Scheinfeld, Germany. Photographer: Guenter Schiffmann/Bloomberg

Adidas AG, the world’s second-largest sporting-goods maker, rose the most in the benchmark DAX index after forecasting increased sales and profit in 2011 on higher revenue in China and other emerging markets.

Earnings per share will increase 10 percent to 15 percent this year after more than doubling in 2010, Herzogenaurach, Germany-based Adidas said in a statement today. Revenue will increase at a “mid to high single-digit” percentage pace from last year’s record 12 billion euros ($16.5 billion). The company raised its 2010 dividend more than analysts expected.

Adidas has identified China along with Russia and North America as “growth markets,” where it plans to generate about half of its forecast 50 percent sales increase by 2015. Fourth-quarter revenue gained 19 percent as sales climbed 25 percent in China and 34 percent in European emerging markets.

“Usually Adidas’s guidance is rather cautious at the beginning of the year,” Christoph Schlienkamp, an analyst at Bankhaus Lampe in Dusseldorf, said by phone. “We may see an increased forecast later in 2011.” Schlienkamp has a “buy” recommendation on the stock.

The shares rose as much as 2.6 percent, and traded at 47.55 euros, up 2.2 percent, as of 11:56 a.m. in Frankfurt.

Adidas proposed a dividend of 80 cents a share for the year, up from the prior year’s 35 cents. That beat the 66-cent average estimate of 23 analysts compiled by Bloomberg.

Marketing Expenses

Net income for the fourth quarter declined to 7 million euros, or 3 cents a share, from 19 million euros, or 9 cents, a year earlier because of increased marketing expenses.

Adidas didn’t quantify the rise in marketing costs, which included an advertising campaign at the start of the NBA basketball season in the U.S.

The Adidas brand will start its biggest global advertising campaign this month, Chief Executive Officer Herbert Hainer said at a press conference in Herzogenaurach today. Adidas also plans to add 100 stores this year, most of them in emerging countries.

“High consumer demand in Asia is helping Adidas to boost sales and the company is also benefitting from the extension of its own retail network which has higher margins than the wholesale business,” said Klaus Kraenzle, a Frankfurt-based analyst at Silvia Quandt & Cie.

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