Adidas profit margin hits record as pricey sneakers fly

FRANKFURT Fri May 3, 2013 10:13am BST

Different shoes and a soccer ball by German sporting goods maker are pictured before the company's annual news conference in the northern Bavarian town of Herzogenaurach March 7, 2012. REUTERS/Michaela Rehle

Different shoes and a soccer ball by German sporting goods maker are pictured before the company's annual news conference in the northern Bavarian town of Herzogenaurach March 7, 2012.

Credit: Reuters/Michaela Rehle

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FRANKFURT (Reuters) - Germany's Adidas (ADSGn.DE) posted its highest-ever gross profit margin as the sale of higher-priced products through its own stores helped offset weak consumer spending in Europe and ongoing problems at Reebok.

Despite a 2 percent fall in first-quarter sales on a lack of major sporting events, operating profit at the world's second largest sports apparel maker behind Nike (NKE.N) rose a better than expected 8 percent to 442 million euros ($578 million).

Its gross profit margin widened 2.4 percentage points to 50.1 percent, only the second time it has ever reported a figure above 50 percent.

Adidas also confirmed its expectations for full-year earnings per share to rise 12-16 percent.

Chief Executive Herbert Hainer said new products would help offset the lack of sales related to events such as last year's European football championships and the London 2012 Olympics.

A double-digit decline in wholesale revenues at Reebok, plus currency effects, impacted first-quarter group sales, which at 3.75 billion euros fell slightly short of expectations in a Reuters poll of analysts.

Adidas has been grappling with problems at Reebok for over a year and took a 265 million euro write down on the brand at the end of last year.

Reebok lost a big American football contract with the NFL, fraud was uncovered at its Indian operations and it was hurt by a lockout by U.S. hockey players at the end of last year.

Adidas has promised a major drive in fitness in 2013 to revive sales at Reebok. It is focusing the brand on sports like yoga, dance and fitness training.

DZ Bank analyst Herbert Sturm described the results as excellent. "The most important news of today is, that the Adidas Group is able to deliver margin improvements in a difficult market environment," he wrote in a note.

(Reporting by Victoria Bryan; Editing by Maria Sheahan)

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