Adidas upgraded its profitability target for 2020, boosted by double-digit sale increases in key regions and momentum in the running category and Adidas Originals brand.
In a Nutshell: Adidas reported double-digit growth in most regions in Q4. The combined sales of the Adidas and Reebok brands increased 32 percent in Greater China and 31 percent in North America. Sales in Western Europe grew 17 percent, while Latin America sales increased 19 percent.
Following a strong financial performance in 2017, Adidas has also upgraded its 2020 profitability target. It continues to forecast currency-neutral revenues to grow between 10 percent to 12 percent on average per year between 2015-2020. However, the company now expects to reach an operating margin of up to 11.5% by 2020, instead of the previously projected 11 percent.
Sales: Adidas revenues increased 19 percent on a currency-neutral basis, driven by a 22 percent increase at brand Adidas in Q4 to 5.05 billion euros ($6.24 billion). Sales were boosted by strong double-digit sales growth in the running, football and outdoor categories as well as in the Adidas Originals and Adidas Neo brands.
The Reebok brand took a hit, with revenues down 1 percent. Double-digit increases in the running category and in Classics were more than offset by declines in the training category.
Earnings: Better pricing and channel mix drove gross margin up 2.2% to 51.7% Net income grew to 34 million euros ($41.9 billion), or 0.17 euro per share, compared to a loss of 0.05 euro per share in 2016.
CEO’s Take: “2017 was a strong year—financially and operationally. We made great progress toward achieving our mission to be the best sports company in the world. Our strategic growth areas—North America, Greater China and Digital Commerce—were the main drivers of our performance,” Adidas CEO Kasper Rorsted said. “2018 is a key milestone on the road to achieving our long-term targets for 2020. We expect quality growth, with overproportionate bottom-line improvements. This will enable an even stronger increase in profitability by 2020 and allows us to upgrade our long-term target yet again.”