Adidas H1 exceeds expectations

German sporting goods group Adidas reported better than expected first half results, thanks to the World Cup. It has raised its sales projection for its Adidas brand in 2006 to the low double-digit range. Sales rose 49 percent to €4.89 billion since the group acquired US brand Reebok in January. The consolidation of Reebok and strong performances from the Reebok and TaylorMade golf brand helped boost sales. The Adidas brand sales rose 17 percent to €3.31 billion, while TaylorMade sales gained 32 percent to €464 million. Excluding Reebok, group sales rose 19 percent to €3.8 billion, while profits rose only 4 percent to €348 million due to the Reebok acquisition.

Reebok, which has been suffering weak sales, did show an improvement in its order backlog, which was reduced by 13 percent. Adidas has been working hard at improving its performance, but group gross margin dropped 3.7 percent to 44.8 percent, largely because of the Reebok acquisition. “Due to its strong presence in North America, where average gross margins are lower than in other regions, Reebok carries a significantly lower gross margin than the group average,� the company said in a statement. Gross profit for the group rose 42 percent to €2.19 billion. Reebok excluded, Adidas gross profits gained 18 percent to €1.823 billion. Operating profits increased 18 percent to €420 million.