German sportswear group Adidas has booked another quarter of strong earnings and revenue growth thanks to expansion in the US and China, but saw its share price dip as growth slowed in Europe.
Third-quarter revenues increased 9% to EUR5.68bn (US$6.59bn), while earnings jumped more than a third to reach EUR526m from EUR386m a year earlier.
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Sales of the Adidas brand jumped 13% on double-digit increases in the running and outdoor categories, as well as at Adidas Originals and Adidas Neo. The football and basketball categories, however, saw a decline, due to the termination of two major sponsorship deals.
Revenues at the Reebok brand, meanwhile, edged up 1% as efforts to clean up the brand’s distribution in the US marketplace had a negative impact on its top-line development.
In the US and Greater China, sales of Adidas and Reebok jumped 28%, but grew just 7% in Europe, lower than the 19% of growth in the second quarter. In Russia, sales were down 17%, which Adidas blamed on “the ongoing challenging consumer sentiment” and additional store closures.
“The company’s strategic growth areas – North America, Greater China and e-commerce – were again the main drivers of our strong top-line performance during the third quarter,” said CEO Kasper Rorsted. “We are even more pleased with the quality of our growth, which is clearly reflected in the exceptional profitability improvement in Q3. We delivered another set of strong results and are fully on track to achieve our ambitious 2017 financial targets.”
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By GlobalDataGross margin in the period improved 2.4 percentage points to 50.4%, while operating margin increased 2.7 percentage points to 14%.
Amid a slowdown in North America’s athletic market, Adidas has been catching up with rivals Nike and Under Armour. In September, Nike posted its slowest quarterly sales growth in nearly seven years, with North America the only region to report a sales decline for the period.
Under Armour, meanwhile, is looking to transform from a largely domestic driven apparel business to a global sports and lifestyle brand. Last month the company cut its full-year sales and earnings outlook and reported its first year-on-year revenue decline.
Cowen analysts believe Adidas could potentially double its market share in North America to 30% thanks to the product pipeline in its Boost platform and consumers’ increasing awareness of the brand.
Adidas, which raised its 2017 outlook in July and its long-term forecast in March, has reiterated its forecast and is expecting sales to increase between 17% and 19% on a currency-neutral basis, and net income to increase between 26% and 28% to between EUR1.36bn and EUR1.39bn.
