Iverson Line Success Hoists Reebok Earns Spurred on by the success of Allen Iverson's sneakers and sportswear, Reebok International Ltd.'s (NYSE:RBK - news) second-quarter profits rose 32 percent, beating the high end of Wall Street estimates by a penny, as it secures more shelf space from shopping mall retailers for its hot-selling basketball shoes. While Iverson's Philadelphia 76ers went down to defeat in the NBA Championship to the Los Angeles Lakers, Iverson helped Reebok steal a victory in what looked to have been a loser of a quarter. Despite weak foreign currencies and a soft U.S. retail environment, Reebok raised the floor of its 2001 earnings forecast by 5 percent. Reebok Chief Financial Officer Ken Watchmaker told analysts the company expects full-year earnings growth between 20 percent and 25 percent. ``While currency and the retail climate in the (United States) continue to be challenges, we believe we will deliver on our 2001 growth targets,'' Watchmaker told analysts during a conference call. Before the market opened, Canton, Massachusetts-based Reebok said it earned $14.1 million, or 24 cents a share, in the second quarter. That compared with net income of $10.7 million, or 19 cents a share, in the year-ago period. Analysts were looking for Reebok to earn between 20 and 23 cents a share, with a consensus of 21 cents a share, according to Thomson Financial/First Call. Reebok's second-quarter net sales rose 3.8 percent, to $711 million, compared with $685 million in the year-ago quarter. Sales comparisons were hurt by weak foreign currencies. Eliminating currency fluctuations, Reebok said sales increased 6.8 percent during the quarter. Watchmaker said Reebok expects 2001 sales to grow between 5 percent and 7 percent over last year's $2.86 billion. ``THE ANSWER'' Reebok is securing a better foothold from major specialty athletic chains such as Foot Locker and Champs with its hot-selling Allen Iverson basketball shoe, said John Shanley, a shoe industry analyst at Wells Fargo First Kasper. Reebok basketball product sales increased 20 percent during the first half of the year as teens snapped up sneaker brands endorsed by Iverson, the 76ers All-Star point guard, who is known as, ``The Answer.'' ``In basketball, the story is Iverson,'' Watchmaker said. ''... And for all of 2001, we estimate that Iverson signature products will generate sale increases of approximately 80 percent.'' Reebok's total worldwide backlog for customer orders set to be delivered between July and December increased 17 percent. In the U.S., those customer orders increased nearly 23 percent over year-ago levels. ``They surprised us with the magnitude of their forward order bookings. They were much stronger than we would have anticipated,'' Shanley said. ``Those are pretty damn impressive numbers.'' Gaining more shelf space at large retail stores, however, comes with a price, Shanley said. Reebok's gross profit margin, as a percentage of sales, slipped to 36.7 percent in the second quarter, down from last year's 38.2 percent, Reebok said. Shanley said Reebok's gross margin decline was not as much as he expected, though. He said the company continues to wring out savings from its sales, general and administration expenses, which dropped 3 percent in the quarter. Reebok shares shed 86 cents, or 2.5 percent, to $33.44 in midday trade on the New York Stock Exchange (news - web sites). The stock is up 25 percent this year and outperforming the nearly 10 percent decline in the S&P 500 Index. Shares of No. 1 athletic shoe maker Nike Inc. (NYSE:NKE - news) are down 17 percent this year.		Author Tim McLaughlin   Source Reuters   Return to Articles