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Adidas sees recovery at golf business it hopes to sell

Adidas store in New York
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Adidas on Thursday reported an improvement in second-quarter sales and margins at the golf business it is trying to sell, helping to support the more bullish forecast for 2016 that the German sportswear group gave last week.

Adidas, which had raised its 2016 guidance for a fourth time after producing strong preliminary quarterly results, said revenues at its golf business rose 7 percent, driven by double-digit growth at the TaylorMade golf brand.

Adidas, which launched a review of its struggling golf business a year ago, said in May it would sell TaylorMade and Adams, which sell golf clubs and other equipment, as well as the Ashworth golf shoes and clothing brand.

Bigger rival Nike has also said it would stop selling golf equipment, including clubs, golf balls and bags, and focus instead on innovation in its golf footwear and apparel business and on partnering with more golfers.

Equinet Bank analyst Mark Josefson said the Nike move might make it harder for Adidas to sell TaylorMade.

After peaking around 2000, when Nike endorser Tiger Woods was in his prime, the number of people playing golf in the United States has fallen sharply as fewer young people take up the sport and as busy professionals switch to cycling or running rather than spending the best part of a day playing 18 holes.

Adidas bought TaylorMade in 1997, developing it into the world's biggest supplier of golf drivers. It bought smaller Ashworth in 2008 and Adams four years later. But sales of its golf unit were down in 2015 by a third from their 2012 peak.

Adidas has overhauled top management and cut costs, helping to boost product margins, which it said on Thursday should help the group's gross margin for 2016. It now expects a gross margin of 48.0-48.3 percent versus 48.3 percent last year, compared with previous guidance for a fall of up to 50 basis points.

But it gave no update on the sales process. Several private equity firms have decided against a bid, citing its losses and the sport's waning popularity, sources close to the companies have told Reuters.

Meanwhile, the core Adidas brand is booming after a big marketing splurge, with quarterly sales up particularly strongly in North America, Greater China and western Europe, rising 32 percent, 30 percent and 30 percent, respectively.

Adidas reported double-digit sales increases in running, soccer and training. The company is seeking to address concerns among some investors that its success is too reliant on fashion products like its Superstar sneakers rather than performance sports.

But Adidas shares, which have soared 61 percent this year to make them the top performing German blue-chip, were down 2.4 percent to 144.40 euros by 0745 GMT.

Some analysts said the stock was now looking overvalued.

"Fantastic results, but that is in the current price," said Equinet's Josefson as he cut his rating on the stock to "sell" from "neutral."