adidas delivers record results in 2018

“Record sales, the highest margin in our history, strong net income improvements – 2018 was another successful year for our company.”

Kasper Rorsted, adidas CEO

“We have made great strides toward and are confirming our 2020 financial ambition. Our strategic growth drivers – adidas North America, China and e-commerce – once again delivered double-digit growth. In 2019, we will continue to drive the execution of ‘Creating the New’ to deliver another year of quality top-line growth and overproportionate bottom-line improvements,” said adidas CEO Kasper Rorsted.

Major developments in 2018:

  • Currency-neutral revenues up 8%
  • Double-digit growth in strategic growth areas adidas North America, Greater China, e-commerce
  • Operating margin increases 1.1pp to 10.8%
  • Net income from continuing operations grows 20% to € 1.709 billion
  • Reebok returns to profitability 
  • Management proposes dividend increase of 29% to € 3.35 per share

Outlook for 2019:

  • Currency-neutral sales to increase between 5% and 8%
  • Operating margin to increase to between 11.3% and 11.5%
  • Net income from continuing operations to increase between 10% and 14%

Financial Performance in 2018

Currency-neutral sales increase 8% in 2018
In 2018, adidas delivered another year of significant top-line growth with currency-neutral revenues increasing by 8%. This development was driven by a 9% improvement at brand adidas, reflecting a double-digit sales increase in Sport Inspired as well as a high-single-digit gain in Sport Performance. The latter was driven by double-digit sales growth in the training and running categories. Currency-neutral Reebok brand sales were down 3% versus the prior year, as double-digit sales growth in Classics was offset by a decline in Sport. From a channel perspective, the company’s top line increase was largely driven by double-digit improvements in direct-to-consumer revenues with particularly strong support from e-commerce, where revenues grew 36% to more than € 2 billion in 2018. In euro terms, the company’s revenues grew 3% to € 21.915 billion (2017: € 21.218 billion), reflecting significant negative currency translation effects.

Double-digit growth in North America and Asia-Pacific 
From a market segment perspective, the top-line expansion in 2018 was driven by ongoing strength in the company’s strategic growth regions: The combined sales of the adidas and Reebok brands continued to expand at strong double-digit rates in both North America (+15%) and Asia-Pacific (+15%), the latter driven by a 23% increase in Greater China. Currency-neutral revenues in Latin America were up 6% and sales in Russia/CIS increased 1% as the positive impact from World Cup-related sales offset the significant amount of store closures. While sales in Europe remained flat compared to the prior year level, revenues in Emerging Markets declined 3%.

Outlook for 2019

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.2

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2019-03-13T09:54:27-04:00 March 13th, 2019|