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Adidas Forms Brazilian Venture

Reuters
Tuesday, 25 Mar 2008 | 3:56 AM ET

Adidas said on Tuesday it had raised its sales growth forecast for Reebok as it announced the struggling brand it bought in 2006 would team up with Vulcabras in Brazil.

A joint venture company is slated to begin selling Reebok footwear, apparel and accessories in Brazil and Paraguay in April, prompting Adidas to hike its segment forecast to a currency-neutral percentage growth in the mid- to high-single-digits from a low- to mid-single-digit figure.

Financial results of the joint venture will be fully consolidated within the Adidas group as of April 1, the world's second-largest sports goods group said, adding that all other forecasts for the group published on March 5 remained unchanged.

Since 1992, Vulcabras has been the exclusive and independent distributor as well as a licensee of Reebok footwear and apparel products in Brazil and Paraguay, and the Brazilian shoe manufacturer will continue to supply Reebok products to the joint venture company.

"Reebok and Vulcabras are also in negotiations to form a joint venture company in Argentina, where a Vulcabras subsidiary has been the exclusive distributor of Reebok footwear and apparel since 2004," Adidas said in a statement.

The company has forecast Reebok would achieve an increase in its gross and operating margins this year, helping Adidas group margins to edge up at least 10 basis points to 47.5-48 percent gross and raise its operating profitability by 30 basis points to a minimum 9.5 percent.

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