• Adidas Q2 net income jumped 20.5% to EUR418m (US$484.7m) from EUR347m last year.
  • Gross margin rose 2.2 percentage points to 52.3%.
  • Group revenues were up 4.4% to EUR5.26bn – a currency-neutral rise of 10%.
The combined sales of the Adidas and Reebok brands increased in nearly all market segments on a currency-neutral basis

The combined sales of the Adidas and Reebok brands increased in nearly all market segments on a currency-neutral basis

German sportswear giant Adidas has confirmed its full-year guidance on the back of what CEO Kasper Rorsted called "another strong quarter" helped by a successful World Cup football tournament where the company was one of the main sponsors.

Net income from continuing operations in the second quarter jumped 20.5% to EUR418m (US$484.7m) from EUR347m in the year-ago period, while the company's gross margin increased 2.2 percentage points to 52.3%, compared to 50.1% last year. This development was driven by an improved pricing and channel mix, reflecting the company's focus on the quality of its top-line growth. These improvements more than offset negative currency effects as well as higher input costs.

The latest set of results saw group revenues climb 4.4% to EUR5.26bn – a currency-neutral rise of 10% – reflecting a 12% increase at the Adidas brand that was driven by double-digit growth in Sport Performance, on the back of double-digit growth in the training, running and football categories, as well as high single-digit growth in Sport Inspired.

Revenues at the Reebok brand, however, fell 3% as growth in Classics was more than offset by declines in the training and running categories. While revenues in the wholesale channel increased at a high-single-digit rate, direct-to consumer sales rose at a double-digit rate with strong support from e-commerce, where revenues grew 26% in the quarter.

From a market segment perspective, on a currency-neutral basis, the combined sales of the Adidas and Reebok brands increased in nearly all market segments.

Growth was particularly strong in North America (+16%) and Asia-Pacific (+19%), the latter driven by a 27% increase in Greater China.

Meanwhile, revenues in Latin America (+15%) and Russia/CIS (+14%) also grew at double-digit rates, while currency neutral sales in Emerging Markets increased by 1%, revenues in Western Europe, in line with expectations, remained flat year-over-year.

For the first half of 2018, net income from continuing operations grew 18.7% to EUR960m from EUR809m last year, while net sales grew 3.1% to EUR10.81bn from EUR10.49bn a year ago.

"We delivered another strong quarter on the back of a successful World Cup activation. Our profitable growth was once again driven by our strategic focus areas North America, Greater China and e-commerce, while we continued to invest into the desirability of our brands and the scalability of our business," said Rorsted. "With these results, we remain firmly on track to achieve our set targets for the full year 2018 and long-term until 2020."

For 2018, Adidas continues to expect sales to increase at a rate of around 10% on a currency-neutral basis, driven by double-digit growth in North America and Asia-Pacific. Net income from continuing operations is projected to increase to a level between EUR1.62bn-EUR1.68bn. This development reflects an increase of between 13% and 17% compared to the prior year level of EUR1.43bn, excluding the negative one-time tax impact recorded in 2017.