Berlin: Sportswear maker Adidas AG’s fourth-quarter net profit shrank amid higher operating expenses, but the company beat forecasts as improving sales in a healthier global economy powered a strong rise in revenue.
Adidas said Wednesday that it earned €7 million ($9.7 million) in the October-December period, down from €19 million a year earlier but still better than analysts’ forecast of €3.9 million.
Revenue was up 19.2%, climbing to €2.93 billion from €2.46 billion and beating analysts’ prediction of €2.74 billion.
The company said that figure was helped by currency conversion effects, and global revenue was up 9% on a currency-neutral basis. It reported 15% growth at the Reebok brand.
A 3% rise in overall revenue in western Europe was topped by increases of 12% in North America and 11% in China.
Adidas said operating expenses as a percentage of sales rose to 47.1% from 46.6%, in part due to higher marketing budget costs.
CEO Herbert Hainer said the company “beat all our initial expectations for the year.” He added that “all our brands scored with consumers in an improving worldwide economy.”
Adidas saw its full-year net earnings more than double to €567 million from €245 million. Revenue climbed 15.5% to €12 billion from €10.38 billion. Earnings per share were up to €2.71 from €1.25.
The company said it would propose a dividend of €0.80 per share, up from €0.35 for 2009, citing “the strong cash flow generation in 2010 and the significantly reduced level of net borrowings.”
Hainer said Adidas generated an operating cash flow of €1.2 billion last year, and the company said its net borrowing at the end of the year stood at €221 million, far below the level of €917 million a year earlier.
Adidas said it expects sales to rise by a “mid to high single-digit” percentage this year in currency-neutral terms, an improvement on its previous prediction of a mid-single-digit rate.
It maintained its forecast that earnings per share should increase by 10 to 15%, to between €2.98 and €3.12.
The company forecast continuing positive cash flow, and said excess cash would be used to invest in growth initiatives and further reduce borrowing.
It predicted improvements in the retail sector but also cautioned that the costs of raw materials are expected to rise, though sales and marketing expenses should decline, in part due to the comparison with last year’s outlay for the football World Cup in South Africa.
Investors cheered the report, making Adidas easily the best performer Wednesday on Frankfurt’s DAX index of blue-chip stocks. Its shares were up 1.9% at €47.41, while the DAX was down 1.2% overall.