Adidas Looks Toward Future

Adidas Looks Toward Future
Herbert Hainer Chairman, CEO; Adidas Group

BOSTON — Adidas AG last week focused on its potential bright spots for 2010, rather than the difficulties of the past year.

After reporting a 65 percent drop in fourth-quarter profits, the German footwear company said it sees a promising year ahead for its Reebok brand — particularly in the toning category — and that it expects the upcoming soccer FIFA World Cup to boost overall company sales this year. The firm guided currency-neutral annual sales to increase in the low-to-mid-single digits. Earnings per share are seen between 1.90 euros to 2.15 euros, though below estimates for 2.41.

Regarding Reebok, Herbert Hainer, Adidas Group CEO, said on a quarterly conference call that the brand “can now see the first truth of success demonstrating the validity of the strategic priorities we have set for the brand.” Among its recent achievements, the EasyTone product helped the brand’s fourth-quarter sales rise 4 percent currency neutral in North America for the first time since Adidas acquired Reebok. Hainer said Reebok will continue its focus on toning.

Specifically, the Reebok toning product will expand beyond women’s and walking to men’s and casual. TrainTone will launch for gym training, Hainer said, while RunTone will debut for running. He said the brand’s whole toning offering should sell more than 5 million pairs in 2010.

Another Reebok product launching in March is ZigTech for men’s running and training, which Hainer said is targeted at achieving “a unique energy and cushioning system [that] reduces stress on muscles by up to 20 percent.”

Hainer added that the World Cup and a new campaign for Adidas Sport Style should also boost sales in the lifestyle segment.

Christopher Svezia from Susquehanna Financial Group noted in a report that although Adidas has forecast sales growth for 2010, “significant investments in marketing and retail expansion will likely keep a return to historical margins at a more moderated, multiyear pace.”

In 2010, Adidas expects to bow 150 new stores and remodel around 200.

Last Wednesday, Adidas reported that net profit for the three months ended Dec. 31 fell to 19 million euros, or $28.1 million at average exchange, on sales that declined 5 percent to 2.46 billion euros, or $3.63 billion.

By brand, Adidas sales decreased 4 percent to 1.74 billion euros, or $2.57 billion, while total Reebok sales fell 8 percent to 412 million euros, or $608.5 million.

Retail sales rose 7 percent in the quarter to 497 million euros, or $734.1 million, with comparable-store sales up, the company said, though Adidas brand comps fell 2 percent. Reebok’s comp-store sales increased 12 percent, and it had a strong performance from its e-commerce division.

Adidas said full-year profits declined 62 percent to 245 million euros, or $341.7 million, on sales that slid 4 percent to 10.38 billion euros, or $14.48 billion. Sales in the Adidas brand were down 4 percent for the year at 7.52 billion euros, or $10.5 billion, while Reebok sales fell 7 percent to 1.6 billion euros, or $2.24 billion.

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