Adidas Shares Surge after Solid Earnings, Bullish Outlook

Adidas has raised its full-year earnings outlook after stronger than expected sales in Asia, the fifth consecutive quarter in double digit growth, despite charges related "commercial irregularities" at its Reebok unit in India.

Adidas, the world's second-largest sporting goods group increased its growth forecast for sales this year to nearly 10 percent, from a previous forecast of between 5 percent and 9 percent. It also expets net earnings growth of between 12 percent and 17 percent, a five percent improvement.

Adidas said it has had "exceptional results" for the first quarter of 2012, after unveiling the fifth consecutive quarter of double-digit growth, which was driven by"increases in all regions and segments." The group said that In particular, growth rates in Greater China and Japan as well as at TaylorMade-adidas Golf were "significantly above initial expectations."

Adidas shares traded moer than 5 percent higher in Frankfurt early Monday, changing hands at €63.09, taking the 2012 gain to more than 25 percent.

By region, Adidas revealed that sales in Greater China and in other Asian markets increased 26 percent on a currency-neutral basis while currency-neutral sales in Western Europe grew 7 percent. In European emerging markets, currency-neutral sales increased 15 percent. Group sales for Adidas in North America grew 11 percent on a currency-neutral basis, while sales in Latin America rose 14 percent on a currency-neutral basis.

Group revenues increased 14 percent on a currency-neutral basis, or 17 percent in euro term, to €3.8bn, according to preliminary figures. Group operating profit rose by 30 percent to €409m and due to lower financial expenses as a result of the reduction in net borrowings, and a lower tax rate, the Adidas' net income attributable to shareholders increased 38 percent to €289m.

However, Adidas revealed recently that its unit in India is the subject of a probe, following "commercial irregularities", which could cost the group €125m in pre-tax profits, as well as €70m worth of restructuring in 2012.

"Driving meaningful improvements in our profitability is a central pillar of our Route 2015 strategy," said Herbert Hainer, CEO of Adidas Group in a statement. "The situation in India, although unfortunate, will allow us to now accelerate plans to improve a specific underperforming part of our business. Looking at the bigger picture, we are right where we want to be. We are manoeuvring through the still challenging economic environment in a diligent way, while at the same time ensuring we capture the opportunities that will deliver on our promise - to secure long-term quality growth and enduring success for our Group."

Adidas has since announced that it has replaced its India management and any changes to its outlook has factored in the India probe.