Reebok Q3 profit rise despite acquisition concern

The pending acquisition of Reebok by Adidas for $3.8 billion (£2.14 billion) has had a negative impact on the company's performance, despite healthy earnings in the third quarter. "We believe that the announcement of our planned merger with Adidas has created, in the short-term, some retailer uncertainty with respect to our company and that this impacted our sales and order intake in the quarter," said Kenneth Watchmaker, Reebok's executive vice president and chief financial officer, in a call with analysts Monday to discuss Reebok's third quarter results.

Earnings for the third quarter shot up 43.9 percent to $117.7 million, compared with $81.8 million during the same period last year. This increase was due in part to the sale of its Ralph Lauren footwear license back to Polo Ralph Lauren Corp for $49 million. Reebok had unusual legal expenses from the acquisition by Adidas and the integration of The Hockey Co, which the company acquired in June 2004. A decline in sales at client Foot Locker of $46 million also hurt the company's results.

Sales in the third quarter dropped 10 percent to $1.15 billion. Global footwear sales, including Reebok, Rockport and Greg Norman brands, fell 16.9 percent to $589 million, while the sale of apparel slid 0.7 percent to $452.2 million. The Reebok brand saw its sales decline slightly in the US , but it was the sale of footwear both in the US and internationally that saw the greatest decline. According to analyst John Stanley of Susquehanna Financial Group this decline is in part due to changes in fashion trends away from Reebok's more traditional footwear styles. In the past nine months, Reebok's earnings rose 36.9 percent to $198 million on a sales increase of 1.4 percent to $2.84 billion.