Adidas-Salomon CEO forecasts slight growth in U.S. market by second half of 2004

Adidas-Salomon CEO forecasts slight growth in U.S. market by second half of 2004{mosimage}The head of Germany’s Adidas-Salomon said on Wednesday it may see slight sales growth in its troubled U.S. business this year and said an expected second half rebound would extend into 2005.

“The worst is over but the U.S. business will not turn overnight,” CEO Herbert Hainer told Reuters in an interview. “In 2004, I’m expecting more or less flat sales in the U.S., maybe even slightly positive, but in the second half I do believe we will see the first signs of improvement and this will continue in 2005.”

Orders collected at the world’s second-biggest sporting goods maker to the end of September 2003 showed a currency-neutral drop of 23 percent for the key U.S. region but Hainer said that the sales decline would be less dramatic in the first six months of 2004. “The shortfall in sales will be smaller, this we can see already,” he said.

Last year, Adidas shook up its U.S. management after a surprise slump in orders in the key market. Meanwhile, sales at peers like Puma and Reebok have continued to gather pace in the region – the world’s biggest market for sports footwear.

In a bid to lure customers away from brands like Nike and Reebok, Adidas signed on legendary boxer Muhammad Ali earlier this month.

Sitting in the firm’s World of Sport headquarters in Bavaria, Hainer stood by his forecast of 3 to 5 percent sales growth this year excluding currency effects, and net profit growth of at least 10 percent.

The European Football Championship in Portugal should help sales by triggering demand for goods like the Roteiro soccer ball, which will be used in all matches.

Hainer said the firm now had signed deals with the Latvian and Greek teams, meaning it now sponsors five national squads, more than peers Nike and Puma.

A rising euro has helped the firm extract more profit from its famous three-striped shoes, which are mostly manufactured in Asia for dollars. Hainer said he expected the euro to continue to rise to 1.30 versus the dollar this year – good news for its gross margin, a closely watched gauge of its profitability.

“I see some upside potential for 2004,” said Hainer of the gross margin, which came in at 44.9 percent in 2003.

The firm, which is set to hold its annual press conference on March 10, will announce a “positive surprise” in its debt reduction levels, he said, adding that it had managed to whittle away more than its goal of 100 million euros last year.

Net debt stood at 1.4 billion euros by end-September.

The firm met its 2003 earnings goal despite a fourth-quarter slowdown, with net earnings up 14 percent to 260 million euros.

Shares in Adidas, which also sells skis, clothes, skateboards, golf clubs and balls, traded flat at 92.49 euros on Thursday.

The company’s best-selling lines include shoes such as ClimaCool, which aim to reduce sweating, and the firm has also seen a strong performance of fashion-oriented lines. But Hainer stressed the firm did not seek to copy the format of its smaller German rival Puma, which has seen profits and sales fly by focusing on fashionable sports wear.

“We are much more balanced than a lot of companies,” he said. “Some of those who are now riding the fashion wave will have trouble in the next 12 to 24 months. There are already indications that technical running shoes are coming back.”

Adidas’ market capitalization is almost twice that of Puma. Both firms were created by the Dassler brothers in 1948 and are still based in their quiet home town of Herzogenaurach, Bavaria.