Global athletic footwear and apparel company Adidas Group released financial results for the third quarter of 2015 that exceeded investor community expectations thanks to successful efforts to gain share in the US market and to downsize its golf business. Total revenues at the world’s number two athletic brand after Nike grew 18% in the quarter to €4.758 billion from €4.044 billion in 2014. Currency-neutral sales increased 13%.
In North America, where Adidas is the number three athletic brand after Nike and Under Armour, sales grew by 25.5% to €776 million on a reported basis. Revenue grew by 35.4% in Greater China, to €691 million, and 20.1% in Europe to €1.404 billion.
Currency-neutral Adidas brand revenues grew 14 percent, driven by double-digit sales increases in Western Europe, North America, Greater China, Latin America and MEAA.
On a reported basis, Adidas brand revenues rose by 19 percent, to €4.007 billion, or 84 percent of the business.
Currency-neutral Reebok sales were up three percent versus the prior year, or 6.6% on a reported basis, to €476 million, with revenues more than doubling in Greater China and growing at double-digit rates in Latin America, Japan, and the Middle East/Africa.
Revenues at TaylorMade-Adidas Golf increased six percent currency-neutral, mainly due to double-digit growth in North America.
“Our relentless focus on the consumer is clearly paying off: The great momentum that Adidas and Reebok are enjoying across the globe proves that our products and marketing are resonating extremely well with the target audience, both in the lifestyle and the performance arena,” commented CEO Herbert Hainer. “The third quarter shows that, in combination with our excellence in execution, this is the game plan to drive brand desirability and generate strong top- and bottom-line growth.”
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Gross profit increased 20% to €2.304 billion, and increased by 100 basis points to 48.4% of sales, driven by the positive effects from a more favorable pricing and channel mix, partly offset by higher input costs, negative currency effects as well as a less favorable product mix.
Other operating expenses increased 18% to €1.845 billion, reflecting an increase in sales and marketing investments as well as higher operating overhead costs.
Operating profit increased 26% to €505 million in the third quarter of 2015 compared to €399 million in the prior year, representing an operating margin of 10.6%, up 0.7 percentage points from the prior year level.
Net income from continuing operations grew 20% to €337 million, while net income attributable to shareholders increased 10% to €311 million from €282 million in 2014.
Due to the strong momentum at both Adidas and Reebok, the Adidas Group now expects currency-neutral sales, previously expected to increase by a mid-single-digit rate, to increase at a high-single-digit rate in 2015. Group sales development will be driven by double-digit increases in Western Europe, Greater China and MEAA. Additionally, higher sales expectations in Latin America and North America are expected to further support the Group’s revenue growth. This, as well as the further expansion and improvement of controlled space initiatives, will more than offset the non-recurrence of sales related to the 2014 FIFA World Cup as well as the expected sales decline at TaylorMade-Adidas Golf.
Despite the increased marketing investments and the one-time restructuring costs at TaylorMade-Adidas Golf, the Group is raising its bottom-line expectations for the full year 2015. Net income from continuing operations excluding goodwill impairment is now projected to increase at a rate of around 10%, compared to its previously expected 7% and 10%), compared to net losses of € 642 million in 2014.
On the revised guidance, Hainer stated: “Thanks to our outstanding performance during the first nine months we are reaching the 2015 goal line much faster than we had anticipated. Like true champions we will not rest on our laurels, but will continue to build on our current strength to prepare ourselves for the next stage. The investments into our brands and a leaner golf organization will directly fuel next year’s top- and bottom-line performance and set us up for sustainable profitability improvements from 2016 onwards.”