North America and China drive Adidas growth but Reebok slips

German sportswear firm Adidas reported better-than-expected first-quarter net profit on Thursday as sales grew rapidly in China and North America, although its Reebok business continued to struggle.


Photo: Adidas

Kasper Rorsted, who took over as chief executive in 2016 after a series of profit warnings, has put a stronger focus than his predecessor Herbert Hainer on improving profitability at Adidas, which still lags bigger rival Nike.

Net profit rose 17 percent to 542 million euros ($650 million) as sales grew a currency-adjusted 10 percent to 5.55 billion euros.

The net profit figure exceeded an average analyst forecast for 510 million euros in a Reuters poll, but sales were slightly shy of consensus for 5.59 billion.

Adidas said sales had risen 21 percent in North America, where it has been taking market share from Nike and Under Armour, and 26 percent in greater China, but fell 16 percent in Russia. E-commerce sales rose 27 percent.

Nike last month signalled it expects an end to its revenue declines in North America as the world's largest footwear maker reaps the benefits of its efforts to sell directly to customers and focus on new launches.

However, Under Armour on Tuesday forecast a bigger-than-expected loss for the second quarter, taking the shine off first-quarter sales that topped Wall Street estimates, as it spends heavily on an overseas expansion.

Adidas said sales at loss-making fitness brand Reebok fell 3 percent due to declines in the training and running categories, although it did manage to return to currency-adjusted growth in North America.

In a post-earnings conference call to analysts, Chief Executive Kasper Rorsted addressed the future of the Western Europe market, saying he expects only a limited impact from the upcoming soccer World Cup in Russia, where the economy is struggling, predicting that sales in the region will slow up in the second quarter.

The news sent shares down 5.4 percent at 1430 GMT.

“We are moving to a flattish revenue number for the second quarter,” Rorsted said of Western Europe, adding that this year’s World Cup in Russia offered fewer financial opportunities than the last competition in Brazil in 2014.

Adidas did, however, confirm its 2018 forecast for currency-neutral sales to rise around 10 percent in 2018, with an operating margin of between 10.3 and 10.5 percent, up from 9.8 percent in 2017, but still behind Nike's almost 14 percent.

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