Adidas laces up improved profit outlook despite lagging Europe sales
The German sporting-goods maker says an over-reliance on its retro-inspired Originals range dented sales in western Europe
German sporting-goods maker Adidas lifted its profit expectations for 2018 on Wednesday after a “strong” third quarter saw brisk global demand for its sportswear and sneakers, but sales in western Europe slipped.
CE Kasper Rorsted said the group had “a plan in place” to react to the disappointing European performance.
He blamed an “over reliance” on Adidas’s retro-inspired Originals line for a 1% dip in western European sales in the third quarter, out of step with the double-digit growth recorded in North America, China and the Asia-Pacific region.
“We did not react quickly enough to the trends in the market,” Rorsted told reporters, adding that the brand would respond by refocusing on sports articles and correct the price tag on “overpriced” items.
But the western European cloud failed to overshadow the group’s overall performance in the months from July to September.
Net profit climbed 19% year on year to hit €656m while revenues swelled by a currency-neutral 8% to €5.9bn, boosted by “excellent” growth in the e-commerce section.
In Russia, sales were up 7% as Adidas continued to benefit from a World Cup boost even after the football extravaganza ended.
Rorsted hailed a quarter marked by “high-quality growth” and said that “we achieved strong profitability improvements despite a significant increase in marketing investments and severe currency headwinds”.
The group’s US unit Reebok, however, continued to struggle, recording a 5% dip in sales despite the efforts of British fashion designer Victoria Beckham, who unveiled her first Reebok collection in July.
Rorsted nevertheless said the group was “very happy with the progress we’re making”, pointing to a rise in profitability at Reebok and a robust performance from the brand’s Classics shoe range.
Adidas bought troubled Reebok in 2005 in an attempt to narrow the gap with main rival Nike. The US fitnesswear specialist is currently undergoing a vast restructuring that includes store closures and a stronger emphasis on the women’s market.
“The medium- and long-term priority is to get Reebok to grow again,” Rorsted said. “Right now the primary [focus] is profitability.”
Looking ahead, Adidas said it expects net income for 2018 to grow 16% to 20% to €1.6bn-€1.7bn, up from an earlier predicted increase of 13%-17%.
Full-year revenues are projected to climb 8% or 9% year on year, down from a previous estimate of about 10%, dragged lower by the disappointing sales in western Europe.
Adidas shares slipped 2.5% to €200.80 in early afternoon trade, against a DAX blue-chip index up 0.8% .