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adidas expects 5-8% topline growth in 2019

During the fourth quarter, adidas revenues increased 5% on a currency-neutral basis, on top of 19% growth in the prior year period. This development reflects an increase of 5% at brand adidas. Double-digit growth in Sport Inspired and in the training category as well as high-single digit growth in running were partly offset by a strong decline in football revenues reflecting the non-recurrence of sales related to the 2018 FIFA World Cup in the prior year’s quarter.

The revenues at the Reebok brand declined 1%, as the double-digit increase in Classics was more than offset by a decline in Sport. In euro terms, sales for the company were up 4% to € 5.234 billion in 2018.

Double-digit growth in Asia-Pacific
On a currency-neutral basis, the combined sales of the adidas and Reebok brands continued to grow at double-digit rates in Asia-Pacific (+11%), driven by a 13% increase in Greater China. The sales in North America grew 9%, on top of a 31% increase in the prior year period, driven by continued double-digit growth for the adidas brand. Currency-neutral revenues in Latin America (-1%) and Russia/CIS (-2%) declined at a low-single-digit rate, while sales in Emerging Markets (-5%) and Europe (-6%) decreased at a mid-single-digit rate.

Gross margin up 0.5 percentage points to 52.2%
The company’s gross margin increased 0.5 percentage points to 52.2% (2017: 51.7%), mainly due to the positive impacts from a better product and channel mix as well as lower input costs, which more than offset significant negative currency effects. Other operating expenses were up 5% to € 2.645 billion.

This development reflects a significant increase in marketing expenditure as well as higher operating overhead expenditure. The company’s operating profit decreased slightly to € 129 million from € 132 million in 2017, representing an operating margin of 2.5% (2017: 2.6%).

adidas expects top-line growth of between 5% and 8% in 2019
The company projects sales to increase at a rate of between 5% and 8% on a currency-neutral basis in 2019. While the company is experiencing a strong increase in demand for mid-priced apparel, adidas will not be able to immediately cover this demand in full due to supply chain shortages. Consequently, growth is expected to be negatively impacted, particularly in North America during the first half of the year.

The overall impact on the company’s full year growth rate in 2019 is anticipated to be between 1 and 2 percentage points. adidas anticipates growth of between 3% and 4% in the first half of 2019, followed by a sequential acceleration during the second half of the year as the company will be able to scale the respective supply over time.

Currency-neutral revenues to increase in all market segments
While currency-neutral revenues in Asia-Pacific are projected to grow at a double-digit rate, currency-neutral revenues in North America and Emerging Markets are expected to grow at high-single-digit rates. Sales in Latin America and Russia/CIS are forecast to improve at a low-single-digit rate in currency-neutral terms. In Europe, the company expects to return to growth in the course of the year and forecasts a slight increase in currency-neutral revenues for the full year.

Bottom line to grow at double-digit rate
The company’s gross margin is forecast to increase to a level of around 52.0% (2018: 51.8%). The operating margin is expected to increase between 0.5 percentage points and 0.7 percentage points to a level between 11.3% and 11.5% (2018: 10.8%). This, together with continued top-line growth, is expected to once again drive a double-digit-rate improvement of the company’s bottom line: Net income from continuing operations is projected to increase to a level between € 1.880 billion and € 1.950 billion, reflecting an increase of between 10% and 14% compared to the prior year level of € 1.709 billion.


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