Adidas Q1 Profit Beats Expectations, Shares Surge As Company Increases Forecast

Adidas increased its 2012 financial outlook based on better-than-expected sales from Asian markets, the group said in a press statement Monday announcing its first quarter reports.

Our first quarter performance confirms the outstanding brand momentum and global power of the Adidas Group, CEO of the company Herbert Hainer said.  

Our investments in brands and channels are yielding an unprecedented period of growth for the Group, as we continue to excite consumers and customers with the ultimate in product and brand experiences, he added.

The group raised its forecasts for the year based on strong first quarter results despite irregularities at  the Reebok unit in India, which the company said would cost them €125m in pre-tax profits and €70m for restructuring related expenses in 2012.

The group said that the growth rate was now revised at 10 percent on a currency-neutral basis, from the previously announced mid-to-high-single-digit growth. It also announced a stable gross margin despite negative one-time charges of up to EUR 70 million related to today's announced potential restructuring and changes to commercial activities in India.

Reacting to the alleged irregularities in its India unit, Hainer said, Driving meaningful improvements in our profitability is a central pillar of our Route 2015 strategy. The situation in India, although unfortunate, will allow us to now accelerate plans to improve a specific underperforming part of our business.

The group attributed the solid results to good sales in all the regions. The company recorded a double-digit growth in all major markets except in Western Europe where the currency-neutral sales grow by 7 percent. 

The company revealed that sales in Greater China and in other Asian markets increased 26% on a currency-neutral basis. In the US and Latin America, sales grew by 11 and 14 percent on a currency-neutral basis.

According to preliminary figures, Adidas's revenues increased 14 percent on a currency-neutral basis or 17 percent in euro terms to EUR 3.8 billion.

The group's net income attributable to shareholders increased 38 percent to EUR 289 million,  the statement said.

Markets reacted positively to the stronger-than-expected results of Adidas as the company's shares surged more than 5 percent in Frankfurt trading Monday.