Adidas Posts Solid Profit In Q1, Stock Reaches All-Time High

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Adidas AG (OTCMKTS:ADDYY) (FRA:ADS) (ETR:ADS) posted its first quarter profit today that exceeded Wall Street estimates. Gross margin for the apparel company came in at a record high, pushing the stocks to their highest level ever.

Adidas Posts Solid Profit In Q1, Stock Reaches All-Time High

For the quarter, net income was up 6.5 percent to 308 million euros ($403 million) beating the average analyst estimate of 298.5 million euro. The revenue for the quarter was down 1.9 percent to 3.75 billion euros, marginally missing the 3.76 billion euro average estimate.

“We delivered strong margin progress, which is our top priority for the year,” Chief Executive Officer Herbert Hainer said in the statement.

Western Europe revenues fell 6 percent owing to a fall in Spain, Italy and the U.K. In China, sales were up 6 percent while in Latin America sales rose by 12 percent. Wholesale revenue for the sporting goods company fell 5 percent on euro, and retail sales rose 4 percent.

Reebok sales, for the first quarter, fell 16 percent. In February, Adidas AG (OTCMKTS:ADDYY) (FRA:ADS) (ETR:ADS) launched Energy Boost shoe for runners and expect improved performance from Reebok this year as it has increased brand’s activities in the fitness market.

“It’s a very strong start to the year and there could be some upside to their 2013 forecast,” said Sebastian Frericks, a Frankfurt-based analyst at Bankhaus Metzler. Revenue was not that impressive, but Gross margins boosted the results, added the analyst.

Gross margin for the sporting-goods maker increased to 50.1 percent from 47.7 percent backed by higher pricing and more sales from company’s own stores, which commands a higher profit margin. Analyst expected the gross margin to come in at 48.6 percent.

Sporting-goods maker will be focusing on other major categories this year owing to lack of major soccer event in 2013. Last year, company reported record soccer sales helped by the European championships.

Adidas AG (OTCMKTS:ADDYY) (FRA:ADS) (ETR:ADS) reaffirmed its outlook, expecting sales to grow by “mid- single-digit” percentage excluding currency shifts in 2013. Operating margin for the company is expected to come in at 9 percent compared to 8 percent last year. The company is targeting 11 percent operating margin by 2015.

According to an analyst, there is a possible ‘upside to guidance on the margin’ if the sales in the second half are better than expected.

The shares of the Germany based company rose to their record high ever, gaining 6.2 percent to 84.44 euros. Last year, company’s stock gained 35 percent giving it a market cap of 17.6 billion euros.

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