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Mar 2, 2011
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Adidas ups 2011 sales goal as consumers spend more

By
Reuters
Published
Mar 2, 2011

March 2 - German sporting goods maker Adidas said rising input costs would prevent margin growth this year, even as it increased its sales goal as consumer confidence and emerging markets grow.

adidas
Adidas' largest store is in Beijing - Photo: Adidas

Shares in the world's second largest sporting goods company after Nike, rose 1.3 percent to 41.14 euros as the sales outlook impressed, outperforming the DAX index, which was down 1.2 percent at 0958 GMT.

"2011 is shaping up to be another great year for the Adidas Group and we are off to a fast start," Chief Executive Herbert Hainer said on Wednesday after the group reported record sales of 11.99 billion euros ($16.56 billion) for 2010.

The German company with the three stripes logo said higher raw material costs would offset improved margins from its network of own stores, meaning group gross margins would remain flat in 2011 at between 7.5-8.0 percent.

It is aiming to increase margins to 11 percent by 2015.

"If input costs continue to rise at such a pace, then the challenge will undoubtedly intensify and lead to further margin pressure for our industry beyond 2011," Hainer said.

High commodities prices are affecting a variety of companies, from consumer goods groups, such as Henkel, to clothing manufacturers and chemicals firms, such as AB Foods and BASF.

The group, based in the same southern German town as arch-rival Puma, said it expected 2011 sales to grow at a mid-to-high single digit rate, improving on its previous guidance for a growth rate in the mid single digits.

"We expect a positive share price reaction in the short term, because competitor Puma had given a comparatively poor earnings guidance," DZ Bank analyst Herbert Sturm said.


HIGH-SCHOOL TEENS

As part of a strategy to grow faster than the market over the period to 2015, Adidas is concentrating on North American high-school kids, as well as Russia and China.

To attract teenagers it is running advertising campaigns with basketball stars, such as Dwight Howard and Derrick Rose.

It said it would open 100 new stores this year, most of them in emerging markets and would extend its Originals brand with a new denim line.

Adidas struggled with excess inventory in China at the start of last year but returned to growth in the second half, with six-month sales up 10 percent.

Adidas also more than doubled its dividend to 0.80 euros per share for 2010 as it reported sales up 9 percent on a currency neutral basis and operating profit of 894 million euros.

Analysts had been expecting 2010 operating profit of 893 million euros on sales of 11.67 billion, and a dividend of 0.64 euros according to a Reuters poll.

It maintained its forecast for earnings per share to rise by 10-15 percent, setting a target of 2.98 euros to 3.12 euros.

"I did expect Adidas to post very healthy results, especially thanks to growth in emerging markets, but the outlook is nonetheless a nice surprise," a Frankfurt-based trader who declined to be named told Reuters.

(Additional reporting by Josie Cox; Editing by Jon Loades-Carter and Louise Heavens)

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