Herzogenaurach, Germany, Nov. 3 (Bloomberg) — Adidas- Salomon AG, the world’s second-largest sporting-goods maker, said third-quarter net income rose 21 percent, boosted by demand for its Salomon snowboards as winter approaches.
Net income rose to 261-million deutsche marks ($140-million), or 5.76 marks per share, in the quarter from 216-million marks, or 4.77 marks, a year earlier. That beat the 14 percent gain expected by 5 analysts polled by Bloomberg.
Adidas entered the world of the snowboarders, skiers and inline skaters by buying France’s Salomon for $1.35 billion two years ago. After cutting costs, third-quarter sales from Salomon rose 18 percent, better than domestic rival Skis Rossignol SA’s 12.5 percent increase in the first-half ended Sept. 30.
“Salomon is over the mountain, with a turnaround in profit expected next year,” said Uwe Weinreich, an analyst at BHF-Bank AG in Frankfurt, with a “neutral” rating on the stock.
Shares of the Herzogenaurach, Germany-based company rose 3.7 euros, or 5.3 percent, to 74 euros ($77.62). So far this year, the stock has dropped 18 percent, compared to a 11.2 percent gain in the DAX Index of 30 major companies.
Weakness in America
While demand for sports equipment boosted third-quarter sales, sluggish demand for Adidas clothing and weakness in North America held back growth. Third-quarter sales rose 4.1 percent to 3.1 billion marks, with full-year revenue seen gaining 2 percent.
The outlook is better for Europe, where the order backlog rose 5 percent, than in North America, which dropped 16 percent. The company maintained its forecast of earnings per share rising up to 15 percent even with the overall order backlog little changed at 3.8 billion marks at the end of the third quarter. Among the company’s brands, Taylor Made boosted sales 31 percent as a rebound in Asia’s economies awakened demand for golf gear. Salomon’s sales rose 18 percent and the Adidas brand saw a 4 percent drop in clothing sales and a 6 percent increase in demand for its shoes.
The Adidas brand is getting squeezed in the U.S. shoe market by increased competition from domestic athletic shoemakers Nike Inc. and Converse Inc. At the same time, U.S. leisure clothing companies such as Gap Inc. are trying to win consumers away from the Adidas brand.
Feeling The Pinch
“Adidas is feeling the pinch from its competitors, as Nike, Converse and Gap seem trendier,” BHF-Bank’s Weinreich said.
Third-quarter sales in North America fell 5.7 percent to 999-million marks, with European demand stagnating at 1.7-billion marks. With sluggish sales in its main regions, Asian revenue almost doubled to 333-million marks. In Latin America, sales rose 10 percent to 63-million marks.
The biggest unit, footwear, increased sales by 12 percent and the smallest, sports gear, gained 6 percent. Apparel, which brings in 42 percent of sales, declined 3 percent. Separately, Adidas-Salomon said it promoted Herbert Hainer to deputy chief executive. Hainer, currently the management board member responsible for European and Asian distribution, will take up his new post Jan. 1. He will help Chief Executive Robert Louis-Dreyfus with management of operations.
Christian Tourres also deputy chief executive will keep h position, the company said in a statement.