Adidas profits beat expectations as online booms
today May 3, 2019
Adidas reported a 17 percent rise in first quarter net profit on Friday, helped by high-margin e-commerce, even as overall sales growth slowed due to supply chain issues in the North American market, as well as a decline in Europe.
Adidas shares, which have risen by a quarter this year, were up 2.6 percent in early trade.
Chief Executive Kasper Rorsted has put a big focus on improving profitability at Adidas since he took over in 2016, by focusing on growing in North America and Asia and pushing e-commerce, where margins are higher than in stores.
In the first quarter, Adidas said its operating margin rose 1.4 percentage points to 14.9 percent, pulling ahead of bigger rival Nike, which recorded an operating margin of 13.5 percent for the December to February period.
Adidas said profitability had been helped by lower sourcing and marketing costs, favorable currency developments as well as selling more higher priced products and the expansion of online, with ecommerce sales up 40 percent in the quarter.
First-quarter sales rose by a currency-adjusted 4 percent to 5.883 billion euros ($6.57 billion), while attributable net profit came in at 632 million, beating analyst consensus for 5.8 billion and 567 million respectively.
Adidas warned in March that it expects supply chain issues to curb sales growth in the first half of the year, particularly in North America, where it has doubled its business in the last three years to take market share from Nike.
Sales in Europe fell 3 percent in the quarter, while they grew 16 percent in China.
It reiterated it expects sales growth of just 3-4 percent in the first half of the year, speeding up in the second half as it ramps up supplies by reallocating factory capacity and prioritizing the U.S. market.
Meanwhile, smaller rivals are powering ahead: Puma posted a record quarter last week, with currency-adjusted sales up 15.3 percent, while Under Armour Inc raised its full-year earnings forecast on Thursday.
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