Adidas continues its upward climb of the athletic category, reporting a strong third quarter of FY2017 due in part to Chinese and North American sales.
Currency neutral sales increase 12 percent in the third quarter of 2017. This is mainly due to the 13 percent increase at brand Adidas, which was driven by double-digit growth in the running and outdoor sectors, as well as in Adidas Originals and Adidas Neo. Meanwhile, sales in the football and basketball categories fell, showing a lower license revenue due to the termination of two major sponsorship agreements.
Net income from continuing operations increased 35 percent to 549 million euros ($636.6 million), up from 407 million euros ($471.9 million) last year. Basic earnings per share (EPS) from continuing operations increased 33 percent to 2.7 million euros ($3.1 million), up from 2.03 million euros ($2.35 million) last year. Net income attributable to shareholders grew 36 percent to 526 million euros ($609.9 million), from 386 million euros ($447.6 million) last year, resulting in a basic EPS from continuing and discontinued operations (like the divestiture of the TaylorMade and CCM Hockey businesses) was 2.59 euros ($3), up 34 percent compared to 1.93 euros ($2.24) in 2016.
Operating margin grew 2.4% to 50.4%, compared to last year’s 48.1%, due in part to better pricing and product mix, which more than offset higher input costs and unfavorable currency developments.
The company’s overall revenue growth stems from increases in distribution channels, with major increases coming from ecommerce, with a 39 percent revenue increase, which means sales for the company grew 9 percent during the period, to 5.677 billion euros ($6.58 billion), up from last year’s 5.22 billion euros ($6.95 billion).
Revenues increased 1 percent for Reebok in the third quarter, as efforts to ‘clean up’ Reebok’s distribution in the U.S. are having a negative impact on the brand’s top-line development, according to the brand.
“The company’s strategic growth areas—North America, Greater China and eCommerce – were again the main drivers of our strong top-line performance during the third quarter,” said Adidas 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.”
Around the World
Combined sales of the Adidas and Reebok brands grew across regions with the exception of Russia/CIS. Greater China grew 28 percent and North America grew 23 percent, due to positive sales growth of the Adidas brand of 29 percent in Greater China and of 31 percent in North America. Meanwhile, currency neutral revenues in Western Europe grew 7 percent, Latina America 8 percent, MEAA and Japan 6 percent and 3 percent. Russia/CIS dropped 17 percent showing the challenging consumer sentiment as well as additional store closures during the quarter. Revenues in other businesses, like Golf and Runtastic, were up 14 percent due to double-digit increases in Adidas Golf.
The company confirms its outlook for FY2017. The company continues to anticipate sales increases between 17 percent and 19 percent on a currency-neutral basis. Net income from continuing operations is expected to grow at a rate between 26 and 28 percent to around 1.36 billion euros ($1.58 billion) and 1.39 billion euros ($1.59 billion).