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adidas with successful start into 2019

May 8, 2019 Germany
adidas with successful start into 2019
Germany-based giant announced revenue growth of 4% (currency-neutral) in the first quarter of the financial year. Net income from continuing operations increased by 16% in the period. Full-year outlook confirmed
"We had a successful start to the year, delivering double-digit sales increases in our strategic growth areas Greater China and e-commerce as well as another strong profitability improvement", commented  Kasper Rorsted, adidas CEO, adding: “We confirm our full-year outlook and remain confident about the top-line acceleration in the second half of the year. 2019 will be an important milestone toward achieving our 2020 targets”.

Quarter results

In the first quarter, currency-neutral revenues grew by 4%. This development was driven by 5% growth at brand adidas, reflecting increases in both Sport Inspired and Sport Performance. The latter was driven by high-single-digit growth in the training and running categories, partially offset by tough comparisons in football due to the non-recurrence of last year’s World Cup related revenues. Currency-neutral Reebok sales were down by 6%, despite growth in Classics. From a channel perspective, the company’s top-line increase was largely driven by double-digit improvements in direct-to-consumer revenues with particularly strong support from e-commerce, where sales grew by 40% in the quarter. In euro terms, the company’s revenues grew by 6% in the first quarter to 5.883 billion euros (compares to 5.548 billion euros in 2018).

Growth in most market segments

From a market segment perspective, the top-line expansion in the first quarter was driven by sales increases in most market segments: The combined currency-neutral sales of the adidas and Reebok brands expanded at double-digit rates in Russia/CIS (+22%), Asia-Pacific  (+12%) – driven by overproportionate growth in Greater China (+16%) – and Emerging Markets (+10%). While revenues in North America increased 3% driven by a 5% increase at brand adidas, sales in Latin America were down 3%. Revenues in Europe, in line with expectations, also declined 3% during the quarter.

Net income

The company’s net income from continuing operations increased by 16% to 631 million euros (542 million euros in 2018).

Outlook for FY 2019 confirmed

For 2019, the company continues to expect sales to increase at a rate of between 5% and 8% on a currency-neutral basis. As announced in March, adidas is experiencing a strong increase in demand for mid-priced apparel, which the company is not able to immediately cover in full due to supply chain shortages. Consequently, adidas continues to expect sales growth of between 3% and 4% in the first half of 2019, followed by a sequential acceleration during the second half of the year. The company’s gross margin is forecast to increase to a level of around 52.0% (2018: 51.8%). The operating margin is expected to increase between 0.5 percentage points and 0.7 percentage points to a level between 11.3% and 11.5% (2018: 10.8%). This, together with continued top-line growth, is expected to once again drive a double-digit-rate improvement of the company’s bottom line: net income from continuing operations is projected to increase to a level between 1.880 billion euros and 1.950 billion euros, reflecting an increase of between 10% and 14% compared to the prior year level of 1.709 billion euros.

Photo by Bogdan Glisik on Unsplash

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