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SBD Global/August 3, 2012/Finance

Adidas Sales Increase By 15% Due To London Games

Adidas said that "full-year earnings would reach the top end of its target range" due in part to its involvement in big events such as the London Games, according to Chris Bryant of the FINANCIAL TIMES. Sales "jumped" 15% to €3.5B ($4.25B) in the second quarter compared with the prior year period, helped by "strong growth in the U.S. and in China and other emerging markets." Net income rose 18% to €165M ($200.4M), beating a consensus forecast of €157M ($190.7M) compiled by Bloomberg. Basic earnings per share were 18% higher than in the second quarter of '11 at €0.79 ($0.96) (FINANCIAL TIMES, 8/2). REUTERS' Victoria Bryan reported that adidas "has already reached its target for sales of Olympics merchandise in the U.K.," as fans snap up Team GB T-shirts, soccer kits and the Union flag wristbands as sported by tennis player Andy Murray. Adidas CEO Herbert Hainer said that the German group "had sold around 100 million pounds ($156M) of Olympics merchandise since products first hit the shops over a year ago, with more to come." Hainer said, "The biggest sales are coming now. We can see people are queuing in stores now to get their products." Along with making the official London 2012 sports apparel merchandise, which "does not feature its three-stripes logo," for sale in the U.K., adidas provides the kit for hosts Team GB, replicas of which can be bought in stores (REUTERS, 8/2). BOERSEGO.de reported that "the company now expects a record surplus" of €770-785M ($935-954M) for '12. This would be a 15-17% increase over last year. Recently adidas predicted an increase of 12-17%. The company's revenue "is still expected to increase" by 10% (BOERSEGO.de, 8/2).

STICK WITH IT: In other news, REUTERS' Victoria Bryan also reported adidas said that "it was not planning to sell struggling unit Reebok and that it hopes to return the division to growth" in '13. Hainer said, "I don't think it has anything to do with structure. What we were lacking in 2012 was new product initiatives" (REUTERS, 8/2).

DUCKING THE AMBUSH: Hainer appeared on CNBC’s “Squawk on the Street” Thursday morning from London. CNBC’s Michelle Caruso-Cabrera said “one of the things that’s new about the Olympics this year is how aggressive” the IOC is in “preventing ambush marketing when sponsors who haven’t paid the big bucks, like you have, try to do things to associate themselves with the Olympics.” Hainer said adidas paid “around $100 million (but) honestly, I don’t know exactly what we paid” to be a LOCOG Partner. Hainer: “But in general, I think this is absolutely correct because as a sponsor, you put a lot of money into it. You spend it … helping them organize the Olympic Games and then you're granted some rights and the only thing you want is that these rights are respected. Not more, not less.” Hainer said the IOC and the host city have “learned that if this happens again,” such as when Nike inundated the Atlanta Games with their logo, “then no sponsor will be willing to pay any money any more.” Hainer said the athletes and NGBs “will have to speak with the IOC” about the rule forbidding athletes to monetize their success during the Games by promoting non-IOC sponsors and “how this will continue in the future because we are also hurt by that.” Hainer: “This is a case where everybody involved is concerned and I think we have to find a common solution.” To determine the return on investment of adidas’ sponsorship dollars, there is the “commercial interest where you say, ‘I have paid so much and I want to regain as much as possible.’” The other is the “exposure” the Olympics afford your company and “for your brand. The whole world sees the athletes in your brand.” Hainer added, “From a commercial perspective, we’re doing very well. We have achieved already our objective and from the exposure … you see us everywhere” (“Squawk on the Street,” CNBC, 8/2).
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