Adidas shares jump as North America growth outpaces Nike

The World Cup boosted Adidas sales while North Amercia performed especially well. (Reuters)
Updated 09 August 2018
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Adidas shares jump as North America growth outpaces Nike

  • Shares surge on earnings
  • Greater China sales growth accelerates to 27 percent

BERLIN: German sportswear firm Adidas reported higher than expected second-quarter results on Thursday, as its sales growth continued to outpace rival Nike in North America even as it stagnated in western Europe.

Shares in the company famous for its three-stripe brand jumped 10 percent to a four-month high, before paring gains.

The results are the latest endorsement of a strategy implemented by CEO Kasper Rorsted since taking over in 2016, focused on improving profitability as well as expanding in North America and China and pushing sales via ecommerce.

Adidas has a strong pipeline of new products that will support sales this year and beyond, Rorsted told journalists, noting strong demand for its 1980s retro “Continental” leather sneakers that were relaunched in June.

“Full-year guidance reconfirmed ... which should reassure investors ... particularly given Adidas will have good visibility on the important third-quarter wholesale order book,” said Piral Dadhania, analyst at Royal Bank of Canada.

Sales rose 10 percent to €5.26 billion ($6 billion) after currency effects, beating the 8 percent expected by analysts.

Some analysts had expected higher marketing spending in the quarter due to the soccer World Cup would dent the bottom line, but Adidas counteracted that with higher prices and sales through more profitable channels such as ecommerce.

Adidas saw sales growth in North America slow slightly to 16 percent, but that was still well ahead of the 3 percent growth Nike reported for its March to May fiscal fourth quarter, the firm’s first increase in the region for a year.

In greater China, Adidas sales growth accelerated to 27 percent, slightly ahead of Nike’s 25 percent.

As Adidas had previously cautioned, sales were flat in western Europe, where Nike has been growing faster, but they jumped 14 percent in Russia, which hosted the World Cup.
Adidas has made management changes in western Europe after the company failed to focus enough on the launch of new products, Rorsted said, adding sales were likely to stay flat in the region in the second half of the year.

Nike teams dominated the final rounds of the World Cup, but Rorsted said the tournament was still a success as Adidas sold more than 8 million shirts and more than 10 million balls, and saw a boost to downloads of its app, advertised in stadiums.

Adidas said it was taking an impairment of 475 million euros related to the Reebok trademark in 2016 after the German Financial Reporting Enforcement Panel disagreed with how it calculated historical book value.

But it said the restatement had no impact on its cash position and reiterated its guidance for 2018 and beyond, adding Reebok’s prospects were unchanged. Rorsted noted that sales in North America rose 6 percent despite many store closures.

Adidas bought the Reebok brand in 2005, but it has performed poorly since. Rorsted has given Reebok until 2020 to return to profitability and said it should be helped by a new partnership with British designer Victoria Beckham.


BMW plans massive cost cuts to keep profits from sputtering

Updated 20 March 2019
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BMW plans massive cost cuts to keep profits from sputtering

  • ‘Our business model must remain a profitable one in the digital era,’ chief executive Harald Krueger said
  • Total number of employees is set to remain flat at around 135,000 worldwide

MUNICH: German high-end carmaker BMW warned Wednesday it expects pre-tax profits “well below” 2018 levels this year as it announced a massive cost-cutting scheme aimed at saving $13.6 billion (€12 billion) in total by 2022.
A spokesman said that “well below” could indicate a tumble of more than 10 percent.
The Munich-based group’s 2019 result will be burdened with massive investments needed for the transition to electric cars, exchange rate headwinds and rising raw materials prices, it said in a statement.
Meanwhile it must pump more cash into measures to meet strict European carbon dioxide (CO2) emissions limits set to bite from next year.
And a one-off windfall in 2018’s results will create a negative comparison, even though pre-tax profits already fell 8.1 percent last year.
Bosses expect a “slight increase” in sales of BMW and Mini cars, with a slightly fatter operating margin that will nevertheless fall short of their 8.0-percent target.
“We will continue to implement forcefully the necessary measures for growth, continuing performance increases and efficiency,” finance director Nicolas Peter said at the group’s annual press conference.
BMW aims to achieve €12 billion of savings in the coming years through “efficiency improvements” including reducing the complexity of its range.
“Our business model must remain a profitable one in the digital era,” chief executive Harald Krueger said.
This year, most new recruits at the group will be IT specialists, while the total number of employees is set to remain flat at around 135,000 worldwide.
Departures from the sizeable fraction of the workforce born during the post-World War II baby boom and now reaching retirement age “will allow us to adapt the business even more to future topics,” BMW said.
All the firm’s forecasts are based on London and Brussels reaching a deal for an orderly Brexit and the United States foregoing new import taxes on European cars.
“Developments in tariffs” remain “a significant factor of uncertainty” in looking to the future, finance chief Peter said, adding that “the preparations for the UK’s exit from the EU will weigh on 2019’s results as well.”
In annual results released ahead of schedule last Friday, BMW blamed trade headwinds and new EU emissions tests for net profits tumbling 16.9 percent in 2018, to €7.2 billion.