Shares in German sporting giant Adidas climbed by more than 9% this morning (14 March) as the company forecast strong growth in the year ahead, and upped its 2020 profitability target on the back of what CEO Kasper Rorsted called a “strong” year.
The latest set of results under Rorsted saw group revenues climb 12% in the fourth quarter to EUR5.1bn – a currency-neutral rise of 19% – while gross margin increased 2.2 percentage points to 51.7%.
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However, the company widened its net loss to EUR41m (US$50.7m) in the quarter, from a loss of EUR10m in the same period a year earlier, after incurring a one-time tax impact of $76mn due to changes in the US tax code. Excluding this, net income grew to EUR34m.
Group revenues were helped by a 22% increase at brand Adidas, while revenues at the Reebok brand declined 1%. The combined currency-neutral sales of the Adidas and Reebok brands was led by Greater China (+32%) and North America (+31%).
For the full year, Adidas saw net income rise 7.8% to EUR1.1bn, compared to EUR1.02bn last year. Excluding the tax impact, the group said net income totalled EUR1.17bn.
Gross margin increased 1.2 percentage points to 50.4%, while group sales were up 15% to EUR21.22bn. On a currency-neutral basis, the combined sales of the Adidas and Reebok brands grew at double-digit rates in nearly all regions.
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By GlobalData“2017 was a strong year – financially and operationally. We made great progress toward achieving our mission to be the best sports company in the world,” said Rorsted. “Our strategic growth areas – North America, Greater China and digital commerce – were the main drivers of our performance.
He added the year ahead is a “key milestone” on the road to achieving the group’s long-term targets for 2020. Adidas forecast currency-neutral sales would rise around 10% in 2018, with an operating margin of between 10.3% and 10.5%.
Set in March of last year, its goals for 2020 included currency-neutral sales growth of 10% to 12% on average per year between 2015 and 2020, and net income from continuing operations to grow between 20% and 22% per year.
Now Rorsted says the group expects an “even stronger” increase in profitability by 2020, raising targets for net income to increase between 22% and 24% on average per year in the five-year period. Adidas also expects to reach an operating margin of up to 11.5% by 2020, compared to previous guidance of 11%.
