The Bull

Wednesday 14

November, 2018 9:32 AM



Adidas lifts profit outlook but Europe sales lag

Adidas lifts profit outlook but Europe sales lag

German sporting goods maker Adidas Wednesday lifted its profit expectations for 2018 after a "strong" third quarter saw brisk global demand for its sportswear and sneakers, but sales in western Europe slipped.

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08.11.2018 12:33 PM

German sporting goods maker Adidas Wednesday lifted its profit expectations for 2018 after a "strong" third quarter saw brisk global demand for its sportswear and sneakers, but sales in western Europe slipped.

Chief executive Kasper Rorsted said the group had "a plan in place" to react to the disappointing European performance.

He blamed an "overreliance" on Adidas' retro-inspired Originals line for a one-percent dip in western European sales in the third quarter, out of step with the double-digit growth recorded in North America, China and the Asia-Pacific region. 

"We did not react quickly enough to the trends in the market," Rorsted told reporters, adding that the brand would respond by refocusing on sports articles and correct the price tag on "overpriced" items.

But the western European cloud failed to overshadow the group's overall performance in the months from July to September.

Net profit climbed 19 percent year-on-year to hit 656 million euros ($751 million) while revenues swelled by a currency-neutral eight percent to 5.9 billion euros, boosted by "excellent" growth in the e-commerce section.

In Russia, sales were up seven percent as Adidas continued to benefit from a World Cup boost even after the football extravaganza ended.

Rorsted hailed a quarter marked by "high-quality growth" and said that "we achieved strong profitability improvements despite a significant increase in marketing investments and severe currency headwinds".

Brand Beckham

The group's US unit Reebok however continued to struggle, recording a five-percent dip in sales despite the efforts of British fashion designer Victoria Beckham who unveiled her first Reebok collection in July.

Rorsted nevertheless said the group was "very happy with the progress we're making", pointing to a rise in profitability at Reebok and a robust performance from the brand's Classics shoe range.

Adidas bought troubled Reebok in 2005 in an attempt to narrow the gap with main rival Nike. 

The US fitnesswear specialist is currently undergoing a vast restructuring that includes store closures and a stronger emphasis on the women's market.

"The medium and long-term priority is to get Reebok to grow again," Rorsted said. "Right now the primary (focus) is profitability."

Looking ahead, Adidas said it expects net income for 2018 to grow 16 to 20 percent to 1.6-1.7 billion euros, up from an earlier predicted increase of 13 to 17 percent.

Full-year revenues are projected to climb eight or nine percent year-on-year, down from a previous estimate of around 10 percent, dragged lower by the disappointing sales in western Europe.

Adidas shares slipped 2.5 percent to 200.80 euros by 1315 GMT, against a DAX blue-chip index up 0.8 percent.
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