Sporting goods giant Adidas Group has raised its earnings and sales forecasts for this year, after it exceeded its targets in 2015, thanks to increased marketing investments.
Based on preliminary unaudited figures, group sales increased 16% to EUR16.9bn (US$19.2m) in 2015, up from EUR14.5bn in the prior year period. Currency-neutral group sales were up 10% year-on-year.
By region, Western Europe, Greater China and Latin America and MEAA (Middle East, Asia and Africa) region enjoyed double-digit sales growth.
Adidas brand sales grew 12% on a currency-neutral basis for the full year. Reebok recorded its eleventh consecutive quarter of growth in the fourth quarter and ended the year with a currency-neutral sales increase of 6%.
During the year, the company’s brand-building investments increased by more than 20%. As a result, underlying net income reached EUR720m in 2015, up 12% from EUR642m the year before.
However, Adidas said group net income was impacted by non-operational goodwill impairment losses of EUR34m, mainly related to the company’s Russia/CIS and Latin America cash-generating units.
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By GlobalData“We are in great shape,” said outgoing CEO Herbert Hainer. “Our strategic business plan ‘Creating the New’ with a clear focus on driving brand desirability has already started to pay off.”
The company now expects currency-neutral group sales to grow by at least 10% in 2016, up from the high-single-digit rate target it set it November.
Operating profit is also forecast to rise at a double-digit rate as well, and operating margin to be at least stable compared to 2015.
Cowen and Co analyst John Kernan welcomed the update, noting: “We believe the Adidas release confirms that the athletic apparel and footwear industry still has momentum globally, as Adidas had a stronger Q4 than expected and has enough confidence in its order book and upcoming products to raise its FY16 sales guidance.”
But, he warned: “As Adidas continues to improve its product offering and drive sales growth, both Nike and Under Armour are likely to face more competition globally.”
The estimated sales growth is set to support the group’s efforts to limit an expected gross margin decline, which reflects the projected increase in sourcing costs due to higher labour and material expenses.
How will rising costs impact Adidas sourcing strategy?
Last month, Adidas revealed that its Greater China subsidiary achieved sales of EUR2bn (US$2.18bn) in 2015 – the company’s highest ever annual sales in the region.
Adidas China reaches record sales of EUR2bn
In the same month, the company appointed Kasper Rosted as its new CEO, nearly a year after beginning the search for Hainer’s successor. Rosted will take up his new role in August, joining the company from consumer goods giant Henkel & Co.
Adidas finds replacement for CEO Hainer in Rosted
