Adidas has reported better than expected earnings today thanks to its growth in online retail as well as experiencing a boost in its North American and Chinese performance.
“We had a strong start into the year, with continued sales and earnings momentum. Our major brands Adidas and Reebok as well as all of our key markets posted double-digit sales increases,” said Adidas CEO Kasper Rorsted. “As consumer demand for our products was strong across the world, we were again able to significantly improve our profitability despite ongoing currency headwinds. Building on this performance, we are confirming our full-year guidance. We aim to deliver double-digit revenue growth and an over-proportionate profitability increase in 2017 yet again.”
Major Developments For Adidas In Q1 2017
- Currency-neutral sales increased 16% in the first quarter, made up of an 18% increase in the Adidas brand and a 13% increase in the Reebok brand. Major drivers at Adidas were running and outdoor categories and in Reebok it was their Classics range. Looking at the figures from a channel perspective, growth across the company was particularly strong in ecommerce where there was a growth in revenue of 53%.
- Revenue grew for Adidas in nearly all market segments apart from Russia. Significant increases were seen in America (31%), China (30%) and Japan (21%). Revenue growth was lower in Latin America and Western Europe but growth was relatively strong at 9 percent and 10 percent respectively.
- Operating margins increased 0.9% to 11.1% thanks to an increase in operating profits of 29% from €490 million to €632 million.
- Net borrowings for Adidas as at March 31 2017 stood at €859 million, up €51 million from €809 million. This was due in part to the continued repurchase of Adidas AG shares.
- Average operating working capital as a percentage of sales from continuing operations decreased 0.1 percentage points to 20.1 percent. This is down to a focus on a strong top line development as well as focussing carefully on tight working capital management.
- The rest of the financial year looks bright for Adidas. The company expects sales to increase at an average of 12%, with a particular focus on Western Europe, Greater China and North America. This should also see gross margin increased by 0.5%. Operating profit is expected grow between 18% and 20% with net income from continuing operations increasing to a level between €1.200 billion and €1.225 billion.
Speaking to CNBC earlier today about the results, Kasper Rorsted reiterated Adidas’ maintained focus on growth.
“We’ve had three great years in the U.S. and we have a long way ahead of us. Right now we’re building market share and key franchises, and the pricing we have right now is appropriate; but we need to make sure that we maintain a very strong growth also for the quarters to come and that I’m quite confident about.”