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Adidas targets rapid sales and profit growth until 2020

By Prachi Singh

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Business

Adidas revenues increased 18 percent on a currency-neutral basis in 2016. In euro terms, revenues grew 14 percent to 19.291 billion euros (20.391 billion dollars). Following the successful 2016, Adidas intends to strongly accelerate sales and earnings growth until 2020 as part of its long-term strategic business plan, ‘Creating the New’.

"These results are proof positive that our strategy ‘Creating the New’ is paying off,” said Adidas CEO Kasper Rorsted in a statement, adding, “Building on our 2016 performance, our momentum continues and we will again achieve strong top- and bottom-line improvements in 2017.”

Interested in reading more on Adidas and how it aims to keep momentum? Then click here

Adidas posts buoyant FY16 results

The company said, currency-neutral revenues for the Adidas brand increased 22 percent, driven by double-digit sales increases in Sport Performance as well as at Adidas Originals and Adidas Neo.

At the Reebok brand, currency-neutral sales were up 6 percent versus the prior year, reflecting double-digit sales increases in Classics as well as mid-single-digit growth in the training and running categories.

Revenues in Western Europe increased 20 percent on a currency-neutral basis, driven by double-digit sales growth in all major countries. Currency-neutral sales in North America and Greater China increased 24 percent and 28 percent, respectively. Revenues in Russia/CIS grew 3 percent and in Latin America, revenues increased 16 percent on a currency-neutral basis, as all major countries grew at double-digit rates with the exception of Brazil, where sales increased at a low-single-digit rate.

In Japan and MEAA, sales were up 16 percent on a currency-neutral basis. Revenues in other businesses were up 1 percent on a currency-neutral basis, while increases in other centrally managed businesses and at Runtastic were largely offset by sales declines at CCM Hockey and TaylorMade-Adidas Golf.

Net income up 41 percent on the prior year

The company said in 2016, despite severe headwinds from negative currency effects, the company’s gross margin increased 0.3 percentage points to 48.6 percent, as a result of the positive effects from a significantly better pricing, product and channel mix as well as lower input costs. Net income from continuing operations was up 41 percent to 1.019 billion euros (1.076 billion dollars). Basic earnings per share from continuing and discontinued operations increased 53 percent to 5.08 euros (5.37 dollars) in 2016.

As a result of the strong operational performance in 2016, the Adidas Executive and Supervisory Boards will recommend paying a dividend of 2 euros (2.11 dollars) per dividend-entitled share to shareholders at the Annual General Meeting (AGM) on May 11, 2017. This represents an increase of 25 percent compared to the prior year.

Q4 revenues rise 14 percent

Adidas currency-neutral sales increase 14 percent in the fourth quarter of 2016. During the quarter, Adidas said, it continued to deliver a strong top- and bottom line performance. In euro terms, revenues grew 12 percent to 4.687 billion euros (4.952 billion dollars).

At the Adidas brand, currency-neutral sales grew 18 percent, driven by double-digit growth in the running category as well as at Adidas Originals and Adidas Neo. In addition, high-single digit growth in the training category also contributed to the top-line improvement. Currency-neutral sales at the Reebok brand were up percent, supported by high-single-digit sales increases in the training category and in Classics.

From a market segment perspective, combined currency-neutral sales of the Adidas and Reebok brands in the fourth quarter grew at double-digit rates in key market segments such as North America (29 percent), Greater China (25 percent), Latin America (22 percent) and Western Europe (12 percent). While double-digit increases in MEAA (14 percent) also supported the strong top-line development, revenues in Russia/CIS (down 5 percent) and Japan (6 percent) were below the prior year level.

Currency-neutral sales in Other Businesses declined 14 percent in the fourth quarter, reflecting declines at TaylorMade-Adidas Golf and CCM Hockey. Gross margin increased 1.6pp to 48.8 percent. The company recorded a net loss from continuing operations of 9 million euros (9.5 million dollars) in the fourth quarter and basic earnings per share from continuing and discontinued operations were negative 0.05 euros (0.05 dollar) in 2016.

Adidas sets target for revenue growth till 2020

For 2017, the company expect sales to increase at a rate between 11 percent and 13 percent on a currency-neutral basis. Currency-neutral combined revenues of the Adidas and Reebok brands are expected to grow at double-digit rates in Western Europe, North America, Greater China and Russia/CIS, while currency-neutral sales in Latin America, Japan and MEAA are forecasted to improve at a high-single-digit rate each. Currency-neutral revenues of Other Businesses are expected to be below the prior year level, due to sales decreases at CCM Hockey. Currency-neutral sales at TaylorMade-adidas Golf are expected to grow at a mid-single-digit rate.

In 2017, the gross margin is forecasted to increase up to 0.5 percentage points to a level of up to 49.1 percent. This, together with a forecasted decline in other operating expenses as a percentage of sales, is expected to drive an increase in operating profit of between 18 percent and 20 percent. Net income from continuing operations is projected to increase at a rate between 18 percent and 20 percent to a level between 1.200 billion euros (1.267 billion dollars) and 1.225 billion (1,293 billion dollars).

As a part of its growth strategy, the company now expects currency-neutral sales to increase at a rate between 10 percent and 12 percent on average per year between 2015 and 2020 against previous outlook of increase at a high-single-digit rate. Net income from continuing operations is projected to grow between 20 percent and 22 percent on average per year in the five-year period against previous guidance of increase by around 15 percent on average.

In short
FY16 turnover increases 19.291 bn euros
Q4 sales up 4.687 bn euros
  • The company now expects currency-neutral sales to increase at a rate between 10 percent and 12 percent on average per year between 2015 and 2020.
  • Net income from continuing operations is projected to grow between 20 percent and 22 percent on average per year in the five-year period.
Adidas