Adidas profits surge on strong own-brand sales

Michelle FITZPATRICK
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Adidas says profits raced ahead in third quarter

German sportswear giant Adidas on Thursday reported a spike in third-quarter profits powered by strong demand for its own-brand products, as it drafted in Victoria Beckham to help boost its struggling Reebok unit.

The Bavarian company, which sponsors English Premier League giants Manchester United, said net profit soared to 526 million euros ($611 million) between July and September, up 36 percent on the same period last year.

Group revenues grew by nearly nine percent to 5.7 billion euros, driven by brisk online sales in all regions and the success of Adidas' retro-inspired Originals trainers and its adidas neo urban fashion line.

Demand was especially robust in the key markets of China and North America, where sales of the three-striped brand increased by around a third, Adidas said.

Chief executive Kasper Rorsted said he was pleased "with the quality of our growth" as he reaffirmed the group's 2017 outlook.

"We delivered another set of strong results and are fully on track to achieve our ambitious 2017 financial targets," he said in a statement.

Adidas continues to expect group sales to grow by 17 to 19 percent in 2017 to achieve net profit between 1.36 and 1.39 billion euros.

Like its smaller homegrown rival Puma, Adidas has been gaining ground in the US at a time when market leaders Nike and Under Armour are stalling.

"The retail landscape is changing dramatically in the US," Rorsted told reporters in a conference call.

The only major market where Adidas didn't see growth in the third quarter was Russia, with the group blaming a 17-percent decline in sales there on store closures and "ongoing challenging consumer sentiment" in the face of a sluggish economy.

By the end of this year, Adidas will have shuttered 200 stores in Russia, Rorsted said.

- Teaming up with Beckham -

Another cloud came from the group's troubled Reebok brand, which saw sales increase by just one percent over the third quarter.

The US market was particularly disappointing with sales falling by 22 percent.

But Rorsted instead there was life yet in the brand, and pointed to a collaboration announced Wednesday with British fashion designer Victoria Beckham as a sign of Adidas' commitment to Reebok.

"We are very happy and excited about Victoria Beckham joining the Reebok brand," Rorsted said.

"We believe that she will dramatically help us build our female business which is the origin of where Reebok came from."

Adidas bought the US fitnesswear specialists in 2005 in a bid to narrow the gap with its main rival Nike, but Reebok has struggled to impress at the group and is now undergoing a restructuring.

Rorsted said 52 Reebok stores in the US had now closed down as part of the overhaul, close to half the total number. Sixteen more stores will close their doors in the coming months.

Rorsted said he expected the struggling brand to return to growth in the US next year.

"We are satisfied with the progress we are making, but we also know that this is a longer turnaround that we are engaged with," he added.

Like its homegrown rival Puma, Adidas has used high-profile sponsorships and celebrity endorsements from the likes of rap superstar Kanye West and fashion icon Gigi Hadid to boost the visibility of its brand.

The group is sponsoring next year's World Cup in Russia, and has begun unveiling team jerseys in recent days.

Rorsted said he expected sales of World Cup fan t-shirts to contribute to a further pick-up in growth in the final months of the year.

"You will start to see the initial impact of the World Cup already in the fourth quarter," he said.

Investors were unimpressed with Adidas' upbeat results, as the stock lost 3.2 percent to trade at 178.15 euros -- making it one of the worst performers in the DAX index of blue-chip German shares.