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Adidas confirms FY view despite ongoing supply issues

  • Adidas Q1 net income jumped 10% to EUR462m (US$) from $418m last year.

  • Gross margin rose 1.2 percentage points to 53.5%.

  • Group revenues were up 5% to EUR5.51bn – a currency-neutral rise of 4%.

German sporting goods giant Adidas has reaffirmed its full-year forecast, even though its second-quarter earnings were squeezed by higher air freight costs as it tried to make up for shortages of mid-priced apparel in North America.

Net income from continuing operations in the three months to 30 June increased 10% to EUR462m (US$517m) from $418m a year earlier, while the company's gross margin rose 1.2 percentage points to 53.5%. Higher air freight costs to mitigate the supply chain shortages and a less favourable pricing mix were offset by positive currency developments, lower sourcing costs as well as a better product and channel mix, the company said.

The latest results also saw group revenues climb 5% in euro terms to EUR5.51bn – a currency-neutral rise of 4% – reflecting a 4% rise at the Adidas brand that was driven by a high-single-digit increase in Sport Inspired streetwear. Revenues in Sport Performance declined at a low-single-digit rate, especially in the football category which was boosted by FIFA World Cup-related sales last year.

Reebok brand revenues Reebok grew 3% on a currency-neutral basis in the second quarter, with a double-digit improvement in direct-to-consumer revenues, especially in e-commerce where sales jumped 37%.

Sales increased in most market segments, with the combined currency-neutral sales of the Adidas and Reebok brands up 12% in Emerging Markets and 8% in AsiaPacific, the latter driven by 14% growth in China. Revenues in North America rose 6%, reflecting a 5% increase at brand Adidas and 10% growth for Reebok. Sales in Latin America were up 5%, but a flat year-on-year performance was seen in Europe. Sales in Russia/CIS fell 4% due to difficult comparisons with last year's 2018 FIFA World Cup.

"We delivered another successful quarter," says Adidas CEO Kasper Rorsted. "Sales in our strategic growth areas Greater China and e-commerce continued to increase at a double-digit rate – and so did our bottom line."

For 2019, the company continues to expect sales to increase at a rate of between 5% and 8% on a currency-neutral basis. Meanwhile, net income from continuing operations is seen increasing to between EUR1.88bn and EUR1.95bn, reflecting an increase of between 10% and 14% compared to last year's EUR1.71bn.

As announced in March, Adidas is experiencing a strong increase in demand for mid-priced apparel, which it has been struggling to meet due to supply chain shortages.

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