Adidas Earnings Top Estimates as Turnaround Plan Begins

FRANKFURT, Germany — Adidas AG reported first-quarter earnings that topped estimates as outgoing Chief Executive Officer Herbert Hainer lays the groundwork for a turnaround.

Operating profit rose 12 percent 345 million euros ($384 million), Adidas said Tuesday, compared with the average 321 million-euro estimate of analysts surveyed by Bloomberg. Revenue rose 17 percent to 4.08 billion euros, also beating estimates.

Hainer unveiled a plan in late March to quicken growth through 2020 by focusing on sales in a handful of trend-setting cities from Los Angeles to Tokyo and paring Adidas’s product line to better compete with Nike Inc. Adidas benefited in the first quarter from demand for its Boost running shoes and stronger spending in western Europe, according to Deutsche Bank AG analysts.

“Solid momentum for the core brand matters more than margins,” Deutsche Bank’s Adrian Rott said in an April 27 note. “The margin trajectory towards 2020 is not supposed to be a linear one.” He has a hold rating on the shares.

Adidas is directing marketing at six cities that have an outsize influence on revenue. They also include New York, London, Paris and Shanghai.

“We don’t need to win everywhere, but we need to win where the halo effects are created,” Hainer said at a strategy presentation to investors March 26. CEO since 2001, Hainer has said he wants to serve out the last two years of his contract while the search for his successor is under way.

By Aaron Ricadela; editors: Matthew Boyle, Thomas Mulier, Phil Serafino.