Adidas shares jump as North America growth outpaces Nike
Reuters
Published Aug 09, 2018 06:48AM ET
Adidas shares jump as North America growth outpaces Nike
By Emma Thomasson
BERLIN (Reuters) - German sportswear firm Adidas (DE:ADSGN) reported higher than expected second-quarter results on Thursday, as its sales growth continued to outpace rival Nike (NYSE:NKE) in North America even as it stagnated in western Europe.
Shares in the company famous for its three-stripe brand jumped 10 percent to a four-month high, putting them on track for their best day since the group increased its financial guidance in March. There were up 8.2 percent at 0955 GMT.
The results are the latest endorsement of a strategy implemented by Chief Executive Kasper Rorsted since taking over in 2016, focused on improving profitability as well as expanding in North America and China and pushing sales via ecommerce.
Adidas has a strong pipeline of new products that will support sales this year and beyond, Rorsted told journalists, noting strong demand for its 1980s retro "Continental" leather sneakers that were relaunched in June.
"Full-year guidance reconfirmed ... which should reassure investors ... particularly given Adidas will have good visibility on the important third-quarter wholesale order book," said Piral Dadhania, analyst at Royal Bank of Canada.
Sales rose 10 percent to 5.26 billion euros ($6 billion) after currency effects, beating the 8 percent expected by analysts, while attributable net profit of 396 million was also ahead of the average forecast for 386 million.
Some analysts had expected higher marketing spending in the quarter due to the soccer World Cup would dent the bottom line, but Adidas counteracted that with higher prices and sales through more profitable channels such as ecommerce.
Adidas saw sales growth in North America slow slightly to 16 percent, but that was still well ahead of the 3 percent growth Nike reported for its March to May fiscal fourth quarter, the firm's first increase in the region for a year.
In greater China, Adidas sales growth accelerated to 27 percent, slightly ahead of Nike's 25 percent.
As Adidas had previously cautioned, sales were flat in western Europe, where Nike has been growing faster, but they jumped 14 percent in Russia, which hosted the World Cup.
Adidas has made management changes in western Europe after the company failed to focus enough on the launch of new products, Rorsted said, adding sales were likely to stay flat in the region in the second half of the year.
Nike teams dominated the final rounds of the World Cup, but Rorsted said the tournament was still a success as Adidas sold more than 8 million shirts and more than 10 million balls, and saw a boost to downloads of its app, advertised in stadiums.
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Adidas said it was taking an impairment of 475 million euros related to the Reebok trademark in 2016 after the German Financial Reporting Enforcement Panel disagreed with how it calculated historical book value.
But it said the restatement had no impact on its cash position and reiterated its guidance for 2018 and beyond, adding Reebok's prospects were unchanged. Rorsted noted that sales in North America rose 6 percent despite many store closures.
Adidas bought the Reebok brand in 2005, but it has performed poorly since. Rorsted has given Reebok until 2020 to return to profitability and said it should be helped by a new partnership with British designer Victoria Beckham.
Written By: Reuters
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