Adidas Q2 net falls 93 pct; shares up on H2 hopes

FRANKFURT - Sportswear maker Adidas AG said Wednesday its second-quarter net profit fell 93 percent as currency effects and tough competition weighed on earnings, but hopes of an improvement over the rest of the year helped the company's share price leap nearly 6 percent.

The Herzogenaurach, Germany-based company said net profit in the April-June period dropped to euro9 million ($13 million) from euro116 million in the second quarter of 2008, as sales dipped 3 percent to euro2.46 billion from euro2.52 billion.

As well as the sales decline, the world's second largest sportswear company behind Nike Inc. blamed currency devaluations — the Russian ruble in particular — and the "highly promotional retail environment" for a steep fall in profits. Operating profit for the quarter slid 66 percent to euro72 million from euro208 million a year earlier.

"The impacts of the economic downturn and repercussions on consumer spending ... certainly continued to influence our performance in the second quarter," chief executive Herbert Hainer said.

However, Hainer suggested that trading conditions may be improving even though challenges remained. That helped drive Adidas shares 5.9 percent higher to close at euro32.23 — making the stock the No. 2 riser on Frankfurt's DAX index of blue chip stocks.

"We did not see any fundamental deterioration in our business since publishing our first-quarter results," Hainer said.

"Our financials for the first half of 2009 are exactly in line with the guidance we provided in May — if not a little better," he added. "As a result, I believe we have seen the bottom in our financial performance this year."

He said Adidas will generate "significantly positive earnings per share" through the remainder of the year — although they will be below 2008 levels.

In addition, Hainer said the company likely can expect a large upswing in sales starting toward the end of the year, thanks to the 2010 football World Cup in South Africa.

In 2006, when the cup was hosted by Germany, Adidas sold more than euro1 billion worth of football-related garb as fans snapped up shoes, jerseys and accessories such as the game ball, before and during the tournament.

Despite the upbeat guidance and World Cup prospects, Adidas, which also owns the Reebok brand, said it expected group sales to decline at a low to mid single-digit rate for the full year.

Sales of the TaylorMade-Adidas golf brand are expected to rise at a low single-digit rate for the year.

Only Latin America saw sales rise in the first half of the year. Its increase of 24 percent contrasted with an 8 percent decline in Europe, a 9 percent fall in Asia and a 10 percent slide in North America.

For the first half of the year, net profit fell 95 percent to euro13 million from last year's euro286 million. Sales were down 2 percent to euro5.03 billion from euro5.14 billion.

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