Adidas 1Q Net Profit Falls 97 Percent To Euro5M
The Associated Press
05/05/09 - 02:44 AM EDT
GEORGE FREY
FRANKFURT (AP) — German sportswear maker Adidas AG said Tuesday its first quarter net profit fell 97 percent as the economic crisis crimped the company's sales, especially in North America.
The Herzogenaurach-based company said net profit for the January-March period fell to just euro5 million ($6.61 million) from euro169 million in the first quarter of 2008.
Sales for the period fell 2 percent to euro2.58 billion ($3.41 billion) from euro2.62 billion in the first quarter of 2008.
The company, whose brands include Reebok and TaylorMade Adidas Golf products, said it expects sales to decrease at a low to mid-single digit rate in 2009.
The results pushed Adidas' stock more than 11 percent lower to euro26.21 in Frankfurt trading.
"We've faced a number of economic and market challenges in the first quarter of 2009," said Herbert Hainer, Adidas' chief executive.
"Our results have been materially affected by higher input prices, currency devaluation effects and restructuring costs," Hainer said.
"Although some of these items will recur again as we go through the balance of the year, I am convinced we will put most of these effects behind us in the current year," he said.
Adidas will eliminate about 300 jobs in a layer of regional headquarters management in Europe and Asia and establish a joint operating model for Adidas and Reebok, which the company hopes will save about euro100 million annually. Regional managers would be offered other jobs within the company.
Adidas did not announce job cuts Tuesday, but said a hiring freeze is in place, and the company expects about 300 positions to drop from payrolls through attrition over the next three quarters.
Earlier this year, the company said it would eliminate about 700 jobs at Reebok and TaylorMade Adidas Golf in North and Latin America.
Adidas said it expected lower earnings per share in the near-term, but an improvement in the second half of 2009. The company predicted it would then generate "significantly positive" earnings per share in the second half due to added business ahead of the soccer World Cup, which will be hosted by South Africa in 2010.
During the last World Cup, which Germany hosted in 2006, the company saw huge increases in sales as people bought more soccer equipment and fan garb.
Adidas said first-quarter sales of its main Adidas brand fell 6 percent driven in particular by a fall in sales of soccer equipment. Year-ago soccer equipment sales saw positive effects driven by the Euro 2008 soccer tournament.
Sales of the Reebok brand fell 4 percent during the first quarter, while sales at TaylorMade Adidas Golf fell 6 percent.
The company said sales in Europe fell by 5 percent; in North America by 17 percent, and in Asia by 6 percent.
Sales in Latin America however grew by 31 percent, as Reebok established new companies in Brazil, Paraguay and Argentina.
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