By William Boston
BERLIN -- Adidas AG posted higher quarterly earnings on strong sales in China and predicted continued growth in the second half, but the German sportswear company warned that a protracted trade and currency war could derail the global economy and hurt business.
Retailers such as Adidas have continued to benefit from strong sales in China, and many that produce goods there remain insulated from the trade row with the U.S. But that could change if the conflict deepens and infects the global economy.
"Having the two biggest economies in the world right now at odds with each other has a negative impact on both economies," Adidas Chief Executive Kasper Rorsted told reporters on a conference call on Thursday. "But if we have a currency war that will be a situation where everyone loses."
Even though Adidas published second-quarter earnings that beat analysts' forecasts, investors were disappointed with weak global sales growth. Shares in Adidas fell 2.2%.
Mr. Rorsted said he expected the company to have a "milestone year" amid strong growth in China, having stemmed falling sales in Europe and turned around its long-ailing Reebok brand.
Adidas said net profit for the three months to the end of June totaled EUR531 million ($595 million), up 34% from a year earlier. Sales rose 4.7% to EUR5.5 billion. Analysts had forecast net profit of EUR464.7 million and sales of EUR5.54 billion.
Growth in revenue was driven by China, the mainstay Adidas and Reebok brands, and e-commerce. But revenue was damped by a drop in sales of soccer products, which were up sharply last year because of the FIFA World Cup.
Mr. Rorsted attributed the strong earnings to lower taxes, positive foreign-exchange effects, and the impact of growth in China and improvement in Europe, where Adidas had been losing ground. He said bottlenecks caused by supply-chain issues in the U.S. would be resolved by year-end, helping to spur growth in the U.S. market next year.
China was by far the biggest driver of Adidas's revenue growth in the second quarter. Sales in China rose 14% from a year earlier. Rival Nike Inc., whose business year ended on May 31, said its sales in China increased 16% in its fiscal fourth quarter.
The upbeat report by Adidas is a rare bright spot in Germany, where many of the country's biggest companies have reported disappointing earnings, hit by falling demand in the global auto industry, the U.S.-China trade war, and a number of criminal investigations and lawsuits.
Adidas's sales on a currency-neutral basis rose in most regional markets, posting double-digit growth in China and other emerging markets. Sales in North America increased 6%, driven by growth in Reebok brand products, and were up 5% in Latin America. The company continued to struggle in Russia, where sales fell 4% in the quarter.
Write to William Boston at firstname.lastname@example.org