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Adidas Q1 Sales, Profit Top Estimates As Turnaround Plan Begins

Adidas reported first-quarter sales and profit that exceeded estimates "on strong sales of running shoes and streetwear" as outgoing CEO Herbert Hainer "lays the groundwork for a turnaround," according to Aaron Ricadela of BLOOMBERG. Sales surged 17% to €4.08B ($4.57B), adidas said Tuesday, beating the €3.9B ($4.37B) average estimate. Operating profit rose 12%, sending the stock up as much as 3.3% in Frankfurt. Hainer unveiled a plan in late March to "jumpstart growth" through '20 by focusing on sales in a "handful of trend-setting cities from Los Angeles to Tokyo" and paring adidas' product line to better compete with Nike. Bryan Garnier & Co. analyst Cedric Rossi said, "For the time being, it's enough for investors. The pressure on the management is still there, but it's not as dramatic as it was last September or October." Hainer has said that he wants to "serve out the last two years of his contract while the company searches for his successor." He said, "It's not about whether I stay here until the end of my contract or not, it's about how we turn the company around. We are very optimistic about our outlook for the rest of the year." Adidas' sales and marketing budget increased by 26% in the first quarter to €554M ($620M). The operating margin "excluding a goodwill impairment charge widened slightly" to 8.9%. Baader Bank analyst Volker Bosse called that an "encouraging sign" (BLOOMBERG, 5/5). In N.Y., Ellen Emmerentze Jervell reported sales in North America, "a sore spot" for adidas for many years, "rose 7% on a currency-neutral basis." The company also "reported sales growth in other regions, with growth of 21% in China and 11% in Western Europe." The "black spot was again Russia, where the plunge in the value of the ruble and a shrinking economy have squeezed returns for foreign companies." The Reebok brand "reported another quarter of sales growth, up a currency-neutral 9% on the year" (WALL STREET JOURNAL, 5/5).

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