Adidas earnings boosted by growth in U.S. and Chinese markets

The earnings of German sportswear manufacturer Adidas have experienced a boost from the strong development of its U.S. and Chinese markets, quarterly figures published by the company on Thursday show.

Pedestrians walk past a sportswear store of Adidas in Shanghai October 27, 2017. [File photo: IC]

Adidas told press that its net income soared by 17 percent to 542 million euros (649 million U.S. dollars) during the first quarter of (Q1) of 2018. At the same time, the German company based in Herzogenaurach recorded a currency-adjusted revenue growth of 10 percent to 5.55 billion euros. 

Non-currency adjusted revenue growth was lower at 2 percent in Q1. Nevertheless, the German rival of Nike still performed better than anticipated by most analysts.

"We had a successful start to the year that was fully in line with our expectations: Our high-quality top-line growth was driven by our strategic focus areas North America, Greater China and e-commerce", a statement by Adidas chief executive officer (CEO) Kasper Rorsted read.

Currency-adjusted combined sales grew in most markets in Q1. Growth was particularly strong in North America (plus 21 percent) and Asia-Pacific (plus 15 percent), where sales in China increased by 26 percent. Additionally, overall e-commerce sales rose by 27 percent.

By contrast, revenues in Adidas' core market of Western Europe grew at a more modest pace of 5 percent, while sales in Russia fell by 16 percent due to challenging local market conditions. Sales at the troubled Adidas subsidiary Reebok fell once again in Q1 as well.

The company's gross margin in Q1 increased by 1.5 percentage points to 51.1 percent compared to 49.6 percent in 2017. Adidas was hereby able to offset significant currency headwinds resulting from the depreciation of the dollar with positive effects from a better pricing and product mix.

Rorsted emphasized on Wednesday that Adidas had consequently succeeded in growing "the bottom line significantly faster than the top line while continuing to invest into creating brand desire." For 2018, the CEO continues to expect sales to increase at a rate of around 10 percent on a currency-neutral basis, driven mainly by double-digit growth in North America and Asia-Pacific.

Adidas is Europe's largest and the world's second largest sportswear producer, recording total annual revenue of 21.2 billion euros in 2017. The 93-year old company is publicly-listed on the Dax stock exchange in Frankfurt.