PARIS — The growth continues to come from Greater China and e-commerce for Adidas AG, which on Friday confirmed its full-year outlook after a solid first quarter boosted by double-digit growth in those two strategic areas.
The Herzogenaurach, Germany-based sporting goods firm, which posted a 40 percent rise in like-for-like sales in its e-commerce business, anticipates continued annual growth of between 30 percent and 40 percent in the years to come for the channel.
Of its 25 billion euro sales target for 2020, 4 billion euros will be generated through-e-commerce, Adidas chief executive officer Kasper Rorsted predicted, during a conference call with financial analysts on Friday.
He said digital is fast becoming Adidas’ primary route to market, and since that is “very related to launches,” it will result in higher sales volatility from quarter to quarter.
Sharing insight into the impact and reach of Adidas’ newly signed creative partner, Beyoncé — a wide-ranging deal that includes the relaunch of the star’s Ivy Park ath-leisure brand — Rorsted said within 24 hours of Adidas announcing their partnership, “more than 1 billion impressions were recorded on the Net.”
With “very, very limited” co-branded product launches under both the Adidas and Ivy Park banners scheduled to roll out by end of the year, the collaboration is expected to have an “enormous impact” in the years to come, Rorsted added.
“We want to build a long-term relationship, and we want to be sure that we do the right thing, and also the right channels. One of the channels undoubtedly is going to be digital,” he said.
The brand counts personalities including Kanye West, Pharrell Williams and Kylie Jenner in its portfolio of collaborators.
On China, Rorsted said: “There is no doubt that we have, along with our big competitors, gained market share over the last number of years.” He believes that, alongside Nike, Adidas probably has the highest market share globally and continues to outgrow its major competitors.
Following the launch of Adidas’ eco-friendly Parley shoe three years ago, a model that is expected to shift more than 11 million pairs this year, versus over 5 million in 2018, the executive also announced plans to “take sustainability to the next level” with the recently launched recyclable Futurecraft.Loop, made entirely from TPU. He described as “the next generation of what running shoes look like in a sustainable set-up.”
Adidas said like-for-like net profits advanced 17.1 percent to 633 million euros in the three months ending March 31.
Net sales rose 6.1 percent to 5.88 billion euros, bolstered by increases in both the Sport Inspired and Sport Performance categories. The latter was fueled by high-single-digit growth in the training and running categories, partially offset by a high comparative base in soccer due to the non-recurrence of last year’s World Cup-related revenues.
Adidas also continues to see negative growth in Western Europe, down 3.2 percent year-on-year, with the situation expected to improve by end of 2019. Ditto for the Reebok brand, which the company aims to return to sustainable growth by 2020, the closing year of its “Creating the New” strategic business plan.
Adidas’ gross profit margin — a key indicator of profitability — gained 2.5 percentage points to 53.6 percent from 51.1 percent the year prior.
For 2019, the company said it continues to expect sales to increase at a rate of between 5 percent and 8 percent on a currency-neutral basis. Demand outstripping supply on mid-priced apparel, particularly in the North America, will impact the company’s overall performance to the tune of between 200 million euros and 400 million euros for the topline growth, Rorsted said. The supply chain constraints are expected to be resolved by end of year.
For the full year, Adidas’ gross margin is forecast to rise to a level of around 52.0 percent, versus 51.8 percent in 2018, with the operating margin increasing between 0.5 percentage points and 0.7 percentage points to between 11.3 percent and 11.5 percent, versus 10.8 percent in 2018.