Friday, November 10, 2006

Adidas 3Q: The Albatross Has Landed

Adidas reported its third-quarter earnings on Thursday. Overall its sales numbers were good, but as soon as Adidas announced that it was adjusting DOWN its profits going forward, Wall Street, which thought that everythig was not just hunky-dory but sunny, had a freaking heart attack and the stock took a major hit.

So what happened? The thorn in Adidas's side was defiitely Reebok, which, for whatever reason, Adidas has not been able to get off the ground since it purchased the company about a year ago. Every buyer I've ever talked to thought Adidas buying Reebok was the stupidest move on the planet, but I think Adidas got starry-eyed at getting its paws on the NBA, NFL and MLB licensees that Reebok owned (Adidas has since snatched the NBA license away from Reebok) and didn't have any clue just how bad Reebok's footwear business was when they purchased it.

And on that note, how bad do you think the Barron's reporter, who made an extremely positive call on Adidas in this article two days before it reported, is feeling today?

The addition of Reebok, which Adidas bought in January for $3.8 billion, is expected to pump up overall sales by more than 40% this year, to about €10 billion. Adidas already is benefiting from Reebok's powerful U.S. distribution network, and it's making a promising push in basketball gear, long the domain of Nike.

Much of this sunny view is rooted in the fact that Reebok showed improvement in backlog between the first and second quarters, and some analysts think that trend continued into the third. Analysts are expecting €1.17 a share, although currency fluctuation could throw off predictions.

Chastened by the Salomon misstep, Adidas appears to be making all the right moves with Reebok. It integrated Reebok management quickly, added marketing and design executives from Adidas and other companies to its Canton, Mass., subsidiary, and aims to reduce discounting to retailers. It's also refocusing Reebok toward performance and rap-inspired styles.

Not to be a jerk, well okay, I'll admit it, I'm being a jerk, but everything I highlighted in the above article is just plain wrong and could have easily been refuted if this reported had spoken to anyone who actually buys and then attempts to sell Reebok's shoes.

And as long as I'm already kicking a dog that's down, I gotta give a special prize to the reporter for what has got to be one of the lamest sources for a quote I've seen in a looong time:

Ohio public-relations account manager Cheryl Besl, who's completed three marathons since 2002 wearing Adidas, is an ardent fan of Supernovas. She buys at least two pairs of Adidas a year, including a bright-green pair after the Columbus Marathon last month. "They are very comfortable," she says. "I won't try another brand."

Seriously, I blame the editor of this story for letting such a worthless source--one freaking woman, whose credentials for bigging up Adidas's tech-running product is that she works in p.r.--stay in the story. It's nice that she likes Adidas running shoes and even bought a bright-green pair, but sheesh, I'm thinking that the $150 or so she spends on Adidas every year aint gonna have that much of an impact on a billion dollar company.

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