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Adidas Ups Profit Outlook as Sales Exceed Targets

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Adidas Group topped its earnings targets for 2015 and the athletic wear retailer said its sales and operating profit will rise faster this year than previously expected.

In 2015, sales were up 10 percent (currency-neutral) to 16.9 billion euros ($19.1 billion) driven largely by double-digit sales growth in Western Europe, Greater China and Latin America. Net income grew 12 percent to 720 million euros ($818 million).

Of the group’s brands—which include its namesake plus Reebok, TaylorMade and CCM—Adidas sales saw the biggest growth at 12 percent for the full year, and Reebok recorded its 11th consecutive year of fourth-quarter growth, ending the year with sales up 6 percent.

The retailer now expects sales and revenue to increase by double digits compared to the previously pegged single-digit growth range.

“We are in great shape,” Adidas Group CEO Herbert Hainer said in a statement. “Our strategic business plan ‘Creating the New’ with a clear focus on driving brand desirability has already started to pay off.”

Rebuilding desirability in the face of losing market share to rival Nike has been Adidas’ focus of late, driving the company to spend bigger on marketing—and so called “brand-building investments” increased by more than 20 percent in 2015.

But despite that spend and its apparent success, Adidas still wants its long-standing CEO out sooner than planned. Some analysts have called the company’s profitability during Hainer’s reign a “dry spell.” Instead of a March 2017 exit, Hainer will step down at the end of September this year and Kasper Rorsted, currently CEO of German soap company Henkel, will assume the role as of October.

Adidas Group’s revised revenue guidance sent shares up more than 2 percent to $89.05 at publication time.

The company said its projected sales growth will curb an expected gross margin dip, which will likely come as a result of the rise in sourcing costs for its Asian-dominated supply due to the strong dollar and rising labor rates. Adidas hopes, however, to generate enough operating profit to keep this year’s operating margin “at least stable” compared to 2015.

“I am excited to see the Adidas and Reebok brands connecting extremely well with consumers around the world and across major lifestyle and performance categories,” Hainer said. “Accelerated momentum in North America and Western Europe during the fourth quarter as well as continued double-digit growth in most emerging markets including Greater China is strong evidence of the desirability of our brands. In combination with the positive feedback from customers on our 2016 product line-up, this gives us every confidence that we will again grow the top and bottom line at a double-digit rate.”

Adidas Group will release its final full-year results on Mar. 3.

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