Adidas is performing well globally

The Adidas Group is predicting a global sales increase of between 8 and 9 percent in local currencies for the current financial year, down from a previous forecast of 10 percent, due to continued lower-than-expected sales results in Western Europe. However, it has revised upwards its expectations for profitability, predicting that the gross margin and the operating margin will both improve by about one percentage point to 51.4 percent and 10.8 percent, respectively, and that the group's net earnings will go up by between 16 and 20 percent from the prior year's level of €1,430 million.

In the third quarter, group sales advanced by 3 percent in euros and by 8 percent in local currencies, reaching $5,873 million. The gross margin increased by 1.4 percentage points to 51.8 percent, although foreign currency fluctuations had a negative effect of 1.3 percent. The operating margin improved by 1.3 percentage points to 15.3 percent, despite a 7 percent increase in marketing expenses, which represented 12.2 percent of the turnover. Net income from continuing operations went up by 19 percent to €656 million.

The slight dip suffered by the Adidas Group in Europe in the third quarter (see the next article in this issue) was more than offset by currency-neutral growth of 17 percent in North America and 14 percent in Asia-Pacific, driven by a 26 percent increase in Greater China.

In North America, Adidas' brand sales went up by 17 percent to €1,165 million, while Reebok was off slightly to €104 million, with a slight increase in the U.S. in spite of fewer stores. The regional gross margin grew by 2.2 percentage points to 42.0 percent, as there were no stock clearance issues as before, and the operating income jumped by 86 percent to €229 million.

Classics still represent about half of Reebok's business in the U.S. As in the rest of the world, their ongoing growth was offset by weakness in training and running, but the brand's profitability improved and the management wants the brand to stand more for fitness and performance sports in general.

In the Asia-Pacific region, which overtook Western Europe in reported terms with total sales of €1,894 million, the Adidas brand rose by 15 percent to €1,815 million, while Reebok dropped by 2 percent to €78 million. The gross margin went up by 1.8 percentage points to 57.2 percent, leading to a 17 percent increase in operating earnings to €672 million.

Sales increased by 7 percent in Russia and the rest of the CIS countries, driven by the recent Fifa World Cup, in spite of some store closures. They were flat in Latin America and down by 2 percent in other emerging markets.

Worldwide, retail sales jumped by 28 percent for the Adidas brand in the quarter, with a rise of 6 percent on a comparable store basis in the physical channel. Reebok's retail sales were down by 4 percent overall and by one percent on a same-store basis.

The group opened 137 new stores during the quarter and closed 327, focusing on better stores like the one it has just opened on Nanjing Road in Shanghai, which had more than 10,000 visitors per day after its inauguration.

The management raised eyebrows by announcing a 76 percent jump in the group‘s total online sales in the quarter, three times faster than in the first two quarters of this year.

Besides the deployment of new tools, one of the factors was probably the launch on Sept. 21 of a more accessible version of the best-selling Yeezy shoe at a price of €220 per pair, which represented the company's biggest digital release so far. It was available only on the internet, except in China.

First introduced in the U.S., the loyalty program of Adidas' Creators app has been rolled out to a total of 17 countries. Customers have downloaded it five million times to obtain information on exclusive product releases and events.