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"On fire" Adidas steps up sales goal


A shoe of the Adidas fashion line is pictured in a Munich shoe shop March 3, 2010. REUTERS/Michaela Rehle
A shoe of the Adidas fashion line is pictured in a Munich shoe shop March 3, 2010. REUTERS/Michaela Rehle

By Victoria Bryan

FRANKFURT (Reuters) - Adidas said soaring demand from the United States, China and Russia for its sneakers would offset a profit hit from the Japan earthquake, allowing it to raise its sales outlook for the second time this year.

"Japan is a very profitable country for us and it is definitely eating into our profit," chief executive Herbert Hainer said following forecast-beating first-quarter results.

"In running, basketball and Originals, Adidas in the U.S. is on fire," he said on Thursday.

Shares in the world's second-largest sporting goods company, rose 4.3 percent to an all-time high of 52.05 euros after the results and improved outlook.

"We view the strong demand for sporting goods (as) more important than the unchanged earnings outlook," LBBW analyst Bernd Muell said.

Adidas, which competes with Nike and Puma, said it now expects 2011 sales to rise at a high single-digit percentage rate. That compares with a previous target of a medium to high single-digit percentage rate.

Local rival Puma last month increased its sales goal for the year after growth in the United States helped to drive record sales.

MARGINS KNOCKED

However, soaring raw material costs and the impact of the earthquake in Japan, one of its top five markets, mean the bigger-than-expected increase in sales will not translate into more profits, Adidas said.

Adidas said it expects the 2011 group gross margin to be between 47.5 percent and 48.0 percent, roughly in line with the 47.8 percent recorded for last year.

Hainer said the group may see a 15-25 percent fall in sales in Japan from April to December, resulting in a significant double-digit million euro impact on profits, as power cuts keep stores closed.

Margins are in focus at consumer-facing companies, from soap maker Unilever to clothes retailer H&M, as they seek to pass on soaring commodity costs to customers.

Hainer said Adidas had already begun to increase prices on certain products across its range.

Adidas group sales jumped 18 percent on a currency-neutral basis to 3.27 billion euros ($4.57 billion) in the first three months of 2011, while operating profit came in at 313 million.

Analysts had expected the group to report sales of 3.01 billion euros and operating profit of 283 million, according to a Reuters poll.

(Reporting by Victoria Bryan; Editing by Erica Billingham and Alexander Smith)

($1 = 0.7158 euro)

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