After reporting double-digit increases across its core strategic growth areas and its e-commerce platform, Adidas has increased its profitability outlook.
Adidas has reported net income growth from continuing operations of 19 percent to € 656 million, with revenue from the Adidas brand increasing 10 percent, driven by double-digit growth in sport, as well as high single-digit growth in its sport performance category.
The company’s top-line growth, however, has been attributed to double-digit growth across the company’s e-commerce platforms, where direct-to-consumer revenue grew 76 percent in Q3. Over the quarter, Adidas’ overall revenue grew three percent to € 5.873 billion, up from € 5.677 billion in the corresponding period in 2017.
Kasper Rorsted, Adidas’ CEO, says he is pleased by this growth, especially considering the extra marketing investments and currency headwinds that were a blow to Adidas’ profit margins over the quarter.
“We delivered high-quality growth again in Q3. The top-line expansion was driven by double-digit increases across our strategic growth areas in North America, Greater China and e-commerce,” he said.
“At the same time, we achieved strong profitability improvements despite a significant increase in marketing investments and severe currency headwinds.”
Over the last three months, Adidas increased its gross profit margin by 1.4 percentage points to 51.8 percent, up from 50.4 percent in 2017. According to the company’s results statement, improved pricing drove this boost in its margins, as well as updates to its channel and category mix, reflecting the business’s focus on top-line growth, as well as lowering sourcing costs. From a segmented market perspective, North America, Asia-Pacific and Greater China were the most profitable regions, growing by 17 percent, 15 percent and 26 percent, respectively.
Thanks to this strong performance in the first nine months of 2018, Adidas has increased its full-year outlook.
“With these results, we are confident we will reach a higher-than-expected profitability level in 2018 and remain firmly on track to achieve our long-term targets until 2020,” Rorsted said.
Adidas is now forecasting its net income from continuing operations will reach between € 1.660 and € 1.720 billion in 2018, reflecting an increase of 16 to 20 percent from its earlier prediction of € 1.430 billion.
By 2020, Adidas is confident its e-commerce revenue will reach € 4 billion, with net income growing by 20 to 22 percent per year.
Never miss our best stories. Sign up for Power Retail’s free weekly newsletter and find our daily stories on Facebook, Twitter, LinkedIn, and Instagram.