Adidas Shares Slide as Profit Forecast Misses Estimates

Adidas Shares Slide as 2012 Profit Forecast Misses Estimates
Adidas is increasing its presence in China, Russia and North America, where it plans to generate about half of a targeted 50 percent sales increase by 2015. Photographer: Nelson Ching/Bloomberg

Adidas AG, the second-largest sporting-goods maker, forecast more modest growth in 2012 profit than analysts had predicted, sending the shares lower.

Net income may rise to between 736 million euros ($967 million) and 770 million euros, Katja Schreiber, a spokeswoman for the Herzogenaurach, Germany-based company, said today. That’s less than the 780.6 million-euro average of seven analysts’ estimates compiled by Bloomberg.

Adidas fell as much as 3.8 percent in Frankfurt trading, the steepest intraday drop since Dec. 12. Profitability gains this year will be restricted by rising costs of raw materials and labor, particularly in the first half, the owner of the Reebok brand said. Adidas reiterated its November forecast that 2012 earnings per share will increase 10 percent to 15 percent.

“People are a bit disappointed,” Thomas Effler, an analyst at WestLB AG in Frankfurt, said by phone. “They were expecting a higher guidance.”

Adidas was down 2.2 percent at 56.48 euros as of 10:26 a.m., trimming the stock’s gain this year to 12 percent.

Currency-neutral sales will probably increase “at a mid-to high-single-digit rate” this year and the operating margin will approach 8 percent, the company said.

Adidas reported fourth-quarter net income increased to 18 million euros from 7 million euros a year earlier, beating the 16.8 million-euro average of eight analysts’ estimates compiled by Bloomberg. Fourth-quarter sales rose 11 percent to 3.26 billion euros, also exceeding estimates.

China, Russia

Sales in greater China climbed 23 percent to 1.23 billion euros in 2011 and Chief Executive Officer Herbert Hainer said today he is “fully confident” revenue growth in that market will be “double-digit” this year. Russian sales will exceed 1 billion euros this year, meeting a goal one year early, he added.

Adidas expects earnings this year to benefit from demand related to the European soccer finals and London Olympic Games. The company has about 34 percent of the global soccer market and is the official partner of European governing body UEFA for the finals, which start in June in Poland and Ukraine.

Hainer said he expects Reebok sales to decline this year. The fitness brand posted a 2.5 percent sales increase to 1.96 billion euros in 2011. That compares with a 13 percent sales increase for the Adidas brand.

“The Adidas brand looks set for another buoyant year after successful product launches, boosted by Euro 2012 in June and the Olympics in July and August,” said Julian Easthope, an analyst at Barclays Capital in London, in a March 2 report. Reebok “is likely to have a more difficult year against a tough competition with limited new innovation.”

The smaller competitor of Nike Inc. proposed a dividend of 1 euro a share, up from the prior year’s 80 cents. That matched the average estimate of 21 analysts compiled by Bloomberg.

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