Adidas share price surges on back of strong fourth quarter
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Adidas share price surges on back of strong fourth quarter

Athleisure powerhouse Adidas, famous for its sneakers, reported fourth quarter earnings for fiscal 2017 this week, demonstrating a strong underlying business and pushing the share price upwards. Revenue for the quarter jumped by 12% against the same period in the previous year – a welcome return from the third quarter’s slowdown. The company reassured investors further, claiming that revenue would grow at a “double-digit rate” this year too – Adidas is forecasting it to come in at 10%, when adjusted for currency swings.

Adidas’ share price surges this week after a strong earnings report

graph 1603 adidas

SOURCE: Yahoo Finance

Along with strong fourth quarter earnings and a positive outlook, the company’s share price is probably benefiting from a €3 billion share buyback through to 2021, which the company announced on Tuesday. Investors will rightly see this as a sign of confidence from management that Adidas is set to outperform.

Driving the fourth quarter’s strong results is increasing popularity for “retro” sneakers. Nike has worked hard to own this trend in recent months, and it’s snatched market share from kingpin Nike and smaller competitors as a result. The company also benefited from consistently strong demand in North America and China.

Adidas CEO Kaspar Rorsted thinks that America will continue to push growth, saying he expects a “very strong year” in the country. This will offset a deceleration in Western Europe and the Middle East, he claimed. He told reporters that innovation was key in North America: “there is still a tremendous growth opportunity in the U.S. by introducing new products and new technology. There is still a long way to go for us in the U.S.”

Sports brand Reebok is the only laggard in an otherwise stellar set of results. But even there, signs of improvement are unquestionably showing, and Rorsted noted that the brand was “very close to break-even” leaving him “very satisfied” with its performance overall.

Adidas has lifted its target for operating margin to 11.5%, from 11%, for 2020. It also claims that net income from continuing operations will rise at a faster pace each year to 2020. According to Rorsted, online sales (which are more profitable for the company) will make up 30% of total sales by this point.

Disclosure

Dominion holds Adidas in its Global Trends Luxury Fund.

 


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