Adidas posts jump in sales and profit, confirms outlook
8 Aug 2019
In the second quarter, currency-neutral revenues at Adidas Ag grew 4 percent, while revenues at brand Adidas were up 4 percent, driven by a high-single-digit increase in Sport Inspired. In euro terms, the company’s revenues grew 5 percent to 5.509 billion euros (6.18 billion dollars). Adidas said, net income from continuing operations grew 10 percent to 462 million euros (517.8 million dollars), and basic EPS from continuing operations reached 2.33 euros including the IFRS impact, an increase of 13 percent year-over-year.
“We delivered another successful quarter. Sales in our strategic growth areas Greater China and e-commerce continued to increase at a double-digit rate – and so did our bottom line,” said Adidas CEO Kasper Rorsted in a statement, adding, “We remain confident about the sequential revenue acceleration in the second half of the year and confirm our top- and bottom-line outlook for 2019.”
Adidas posts revenue growth across markets
The company said, revenues in Sport Performance declined at a low-single-digit rate as the non-recurrence of last year’s FIFA World Cup-related sales led to a strong decrease in the football category which more than offset double-digit growth in the training and basketball categories. Driven by the Classics category, revenues of the Reebok brand grew 3 percent on a currency-neutral basis. From a channel perspective, Adidas added that the company’s top-line increase reflects a double-digit improvement in direct-to-consumer revenues with particularly strong growth in e-commerce, where sales increased 37 percent in the quarter.
The combined currency-neutral sales of the Adidas and Reebok brands expanded at a double-digit rate or by 12 percent in Emerging Markets and at a high-single-digit rate or 8 percent in Asia-Pacific, driven by 14 percent growth in China. Revenues in North America increased 6 percent, reflecting a 5 percent increase at brand Adidas and 10 percent growth for Reebok. While sales in Latin America also increased by 5 percent and revenues in Europe were flat year-over-year. The company added that sales in Russia/CIS declined at a mid-single-digit rate by 4 percent due to difficult prior year comparisons in relation to the 2018 FIFA World Cup.
The company’s operating margin improves 0.4 percentage points to 11.7 percent, while the company’s gross margin increased 1.2 percentage points to 53.5 percent. The company’s operating profit grew 9 percent to 643 million euros (720.7 million dollars), representing an operating margin increase of 0.4 percentage points to 11.7 percent.
Adidas first half revenues increase 4 percent
In the first half of 2019, revenues increased 4 percent on a currency-neutral basis, which the company said, is in line with the 3 percent to 4 percent guidance provided at the beginning of the year in light of the supply chain shortages the company has been experiencing following a strong increase in demand for mid-priced apparel. In euro terms, revenues grew 5 percent to 11.392 billion euros (12.7 billion dollars).
From a brand perspective, currency-neutral revenues for brand Adidas grew 5 percent, while Reebok revenues declined 2 percent. Gross margin was up 1.8 percentage points to 53.5 percent, while the company’s operating profit grew 13 percent to 1.518 billion euros (1.70 billion dollars), representing an operating margin of 13.3 percent, an increase of 0.9 percentage points compared to the prior year. Net income from continuing operations grew 14 percent to 1.093 billion euros (1.23 billion dollars), resulting in a 17 percent increase in basic earnings per share from continuing operations to 5.50 euros (6.16 dollars).
Adidas confirms revenue and earnings outlook for FY 2019
For 2019, the company continues to expect sales to increase at a rate of between 5 percent and 8 percent on a currency-neutral basis. Following the 4 percent revenue growth during the first six months, Adidas continues to project 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 percent in 2019. The operating margin is expected to increase between 0.5 percentage points and 0.7 percentage points to a level between 11.3 percent and 11.5 percent. 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 percent and 14 percent.
The company also announced that its supervisory board extended the mandates of executive board members Karen Parkin, responsible for global human resources, and Harm Ohlmeyer, chief financial officer, by five years beyond 2020 until 2025. Karen Parkin and Harm Ohlmeyer have both been members of the Adidas AG executive board since 2017.
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