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Adidas Reaches $410 Million in Profit for Q2

Adidas continues its climb to the top after a successful second quarter of 2017.

After increasing its outlook in a preliminary report of its second quarter earnings last week, the company came out with its full second quarter results, backing up the reasoning for its increased outlook.

“We are pleased to report on another very successful quarter. Both sales and net income from continuing operations increased strongly,” said CEO Kasper Rorsted. “This is testament to the continued momentum our brands enjoy across our key regions and channels.”

Adidas’ currency-neutral revenues were up 19 percent in the second quarter. The company had a 21 percent increase in the Adidas brand, with a 5 percent growth at Reebok. In euros, sales were up 20 percent in the second quarter to around 5 billion euros, or $5.9 billion, up from the same period last year of 4.2 billion euros, or around $5 billion.

Adidas also showed a net income from continuing operations increasing 16 percent to 347 euros, or around $410 million.

Revenue growth within the Adidas brand was due in part by the running category, the Adidas Originals and Adidas Neo. Top-line improvements at Reebok were due to strong double-digit sales increases in Classics, partly offset by the brand’s ongoing efforts to help its U.S. distribution.

Around the World
Combined sales for Adidas and Reebok grew at double-digit rates across regions, with the exception of Russia which fell 11 percent. The company saw strong growth in China, up 28 percent, and North America, up 26 percent and Western Europe, where sales grew 19 percent minus a hard year related to UEFA EURO 2016 products. Latin America saw an increase of 14 percent, MEAA 13 percent and Japan 11 percent. Meanwhile, Adidas’ other businesses which include Adidas Golf and Runtastic, were up 27 percent driven by double-digit increases in all operating segments. E-commerce grew 66 percent.

Gross Margin
Adidas’ gross margin grew 0.7% to 50.1%, up from 49.4% during the same period last year. Despite the difficult retail environment, the company was able to see growth due to better pricing, product and a mix within the channels. Royalty and commission income dropped 2 percent to 29 million euros, or around $34.4 million. Other operating income decreased significantly to 24 million euros, or around $28.5 million, down from 159 million euros, or around $188.7 million, the year before, showing the non-recurrence of other gains related to the early termination of the Chelsea FC contract and the Mitchell & Ness divestiture in last year’s second quarter.

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The company now expects 2017 sales to grow at a rate between 17 percent and 19 percent, as opposed to previously forecast, 12 percent to 14 percent. Adidas expects a year-over-year gross margin improvement during the second part of 2017. Net income from continuing operations is now expected to increase 26 percent to 28 percent in 2017. Previous estimates were between 13 percent and 15 percent.