Aug 3, 2012
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Adidas fans fears of slowdown after Olympics boost

Aug 3, 2012

World No.2 sporting goods maker Adidas reported a slowdown in sales growth in China and Europe, fuelling fears that demand could fade after a summer of sporting events it expects will boost 2012 earnings towards the top of its target range.

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Adidas, famed for its three stripe logo, also said on Thursday second-quarter sales at its Reebok brand slumped 26 percent after "commercial irregularities" at its Indian arm and the loss of a major American football contract.

Shares in the German firm, a sponsor of the London 2012 Olympic Games and the Euro 2012 soccer tournament, were down 1.7 percent by 0850 GMT, among the biggest declines on the local blue-chip DAX index .GDAXI.

While sporting goods companies have been benefiting from a string of major events, there are growing concerns that economic troubles in Europe and slowing growth in China will start to take their toll.

Local rival Puma warned on profit last month as shoppers in Europe, its biggest market, held back on spending, while world No.1 Nike missed quarterly estimates and said orders for future delivery were slowing.

Adidas, whose shares hit an all-time high in May, said it now expects earnings per share in 2012 of between 3.68 euros and 3.75 euros ($4.53-$4.61), compared with a previous target for between 3.58 euros and 3.75 euros. It kept a forecast for overall sales to grow by almost 10 percent.

"Adidas is clearly outperforming Nike and Puma this year," DZ Bank analyst Herbert Sturm said.

However, Adidas also said sales growth in China, where it and rivals are battling with local companies for a slice of the country's brand-hungry consumers, slowed to 13 percent in the second quarter from 26 percent in the first.

Sales in debt-ridden western Europe were up just 5 percent, compared with 7 percent in the first quarter.

Adidas has struggled with Reebok after a trend faded for toning shoes, one of the brand's biggest sellers. Reebok also lost the NFL American football contract in the United States and has suffered from "commercial irregularities" in India.

The group said it was working towards a "fresh start" in 2013 for Reebok India and had filed criminal charges against its former management there. Adidas said in April the reorganization would cost up to 70 million euros.

The group reported second-quarter sales up 7 percent at constant currency rates to 3.52 billion euros and operating profit of 256 million, slightly above analysts' forecasts for 3.5 billion and 243 million respectively.

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