Adi­das fore­casts sales may rise at fastest pace in 5 years

The Pak Banker - - 6BUSI­NESS -

BERLIN: Ger­man sport-shoe maker Adi­das AG fore­cast sales may rise at the fastest pace in five years as con­sumers spend more ahead of the Euro 2016 soc­cer tour­na­ment, set­ting up its in­com­ing chief for a po­ten­tially bet­ter pe­riod than the com­pany's re­cent past.

Adi­das fore­cast 10 per­cent to 12 per­cent growth in both lo­cal­cur­rency rev­enue and ad­justed net in­come this year, pin­ning down its tar­gets less than a month af­ter rais­ing its out­look. Gross mar­gin will nar­row as much as 1 per­cent­age point due to higher pur­chas­ing costs in Asia, Adi­das also said Thurs­day.

The buoy­ant sport­ing-goods mar­ket and abil­ity to raise prices are help­ing Adi­das sur­mount higher costs and pro­vide in­com­ing Chief Ex­ec­u­tive Of­fi­cer Kasper Rorsted with a stronger foun­da­tion than the com­pany has had in years. Sales of sneak­ers and cloth­ing will be helped by the Euro­pean soc­cer cham­pi­onships in June and July, Adi­das said.

"The sport­ing-goods out­look re­mains very healthy, and Adi­das is well po­si­tioned to take ad­van­tage," Pi­ral Dad­ha­nia, an an­a­lyst at RBC Europe, wrote in a note to in­vestors.

CEO Her­bert Hainer re­it­er­ated that Adi­das will com­plete a re­view of its strug­gling golf busi­ness this month. Rev­enue of Tay­lorMade-Adi­das Golf dropped 13 per­cent ex­clud­ing cur­rency shifts in 2015, de­clin­ing to 902 mil­lion eu­ros.

"We are con­sid­er­ably stronger and bet­ter to­day than we were 12 months ago," Hainer said at a press con­fer­ence at the com­pany's Her­zo­ge­nau­rach, Ger­many head­quar­ters.

The 61-year-old ex­ec­u­tive is re­sign­ing one year ear­lier than orig­i­nally planned.

The stock fell 0.9 per­cent to 98.04 eu­ros as of 9:47 a.m. in Frank­furt. It has gained 9.1 per­cent this year, mak­ing it the best per­former in Ger­many's DAX In­dex. The com­pany is rais­ing its div­i­dend 6.7 per­cent to 1.60 eu­ros a share, match­ing the Bloomberg fore­cast.

Rorsted, who starts in Oc­to­ber af­ter Hainer spent 15 years at the helm, will need to im­prove Adi­das's stand­ing in the U.S., where it's slip­ping fur­ther be­hind No. 1 sneaker brand Nike Inc., and in­crease growth in ath­let­ics shoes, which de­fine its brand.

"The big hope is that he's go­ing to close the mar­ket­ing gap with Nike," said Beren­berg an­a­lyst Zuzanna Pusz. Adi­das's fash­ion-ori­ented Orig­i­nals and Neo lines are ex­pand­ing sales faster than per­for­mance footwear, and Adi­das needs to ac­cel­er­ate sport shoe sales to stay com­pet­i­tive, she said.

The com­pany is spend­ing more on sales and mar­ket­ing this year. It's also pay­ing more to pro­duce sneak­ers in Asia be­cause of cur­rency ef­fects and la­bor costs, a prob­lem that's af­fect­ing the whole in­dus­try. Adi­das said higher pric­ing will help off­set that.

"If there is any­where Adi­das could pos­i­tively sur­prise in 2016, it's the gross mar­gin," said John Guy, an an­a­lyst at MainFirst Bank who has a buy rat­ing on the shares.

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