The Adidas Group has upgraded its guidance for this year after it surpassed its targets for sales and earnings in 2015. About three weeks ahead of the scheduled publication of its annual results, the company said its turnover amplified by 16 percent to €16.9 billion last year, which was an increase of 10 percent in constant currencies.
Adidas said the vigorous sales increase was driven by double-digit rises in Western Europe, Greater China and Latin America, as well as the Middle East, Africa and other Asian markets (MEAA) region. Adidas brand sales advanced by 12 percent in constant currencies, compared with a rise of 6 percent for the Reebok brand.
Encouraged by the current demand, the group again increased its marketing investments in the last quarter to support sales this year and in the long term. Marketing spending jumped by 20 percent for the entire year.
The group's net income from continuing operations still increased by 12 percent to €720 million. The profit was achieved despite a tax rate of 32.9 percent, which was higher than predicted. It excludes goodwill impairment losses of €34 million, chiefly relating to the group's cash-generating units in Russia/CIS and Latin America.
Given this performance and its current order book, the Adidas group has raised its sales guidance for this year, forecasting that they will expand at a double-digit rate. The increase should support its efforts to reduce the expected decline in its gross margin, due to a less favorable U.S. dollar hedging rate and rising labor costs, which are both inflating sourcing costs. The group says that the added operating leverage should enable it to raise its operating profit at a double-digit rate, meaning that its operating margin for this year should be at least stable compared with 2015.
Herbert Hainer, the group's outgoing chief executive, attributed the sales uptick to the implementation of the group's latest business plan, Creating the New, which was introduced at the group's investor day last year.
