Adidas sees better second half, confirms 2019 outlook; shares slip
today Aug 8, 2019
German sportswear company Adidas reported disappointing second-quarter sales on Thursday but expects a recovery in the second half after it stemmed a decline in Europe and saw its long-struggling Reebok brand recover.
Adidas shares fell 2.3% by 0725 GMT. The stock had rallied in recent weeks on hopes it might lift its outlook - particularly after German rival Puma raised its sales and profit forecasts following a strong second quarter.
“Given the recent rerating in the shares since April and narrowing valuation gap versus peers, the lack of a sales or earnings beat is unusual and brand momentum remains concerning,” Credit Suisse analysts wrote of Adidas.
Second-quarter sales rose a currency-adjusted 4% to 5.51 billion euros ($6.18 billion), shy of average analyst forecasts for 5.54 billion as the company saw a strong decline in the soccer category a year on from the World Cup.
Adidas had already warned in March that supply chain issues would hit sales growth in the first half, citing particular problems meeting North America demand for mid-market clothing.
Adidas has eroded Nike’s dominance of the U.S. market in recent years, pushing retro styles and teaming up with celebrities such as Kanye West and Beyonce.
Nike has responded by ramping up spending on marketing, with its sales rising a currency-adjusted 10% in the quarter ended May 31, driven by a rise of 22% in Greater China and 9% in Europe, Middle East and Africa.
Adidas quarterly sales were flat in Europe, recovering from a 3% fall in the first quarter after the firm took steps to reduce its reliance on its Originals fashion line and boost sales of sports performance gear, with new product launches.
Group sales rose 14% in China and 6% in North America.
Adidas said it was confident sales would accelerate in the second half, allowing it to confirm a full-year outlook for currency-neutral sales growth of 5-8% and net income from continuing operations of between 1.88 and 1.95 billion euros.
Quarterly net profit from continuing operations rose 10% to 462 million, helped by another quarter of strong growth for e-commerce, where sales rose 37%. Margins are higher for online sales than wholesale.
Reebok sales rose 3%, driven by the popularity of retro styles, particularly in North America, where the brand expanded 10%, and in emerging markets.
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