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Adidas Outruns Rival Nike Even as Revenue Growth Rate Slows

Revenue increased by 8.7 percent, less than half the growth rate in the previous quarter, and operating profit advanced 35 percent to €795 million.
Adidas Store | Source: Shutterstock
By
  • Bloomberg

HERZOGENAURACH, Germany — Adidas AG is outrunning larger rival Nike Inc., even after third-quarter sales growth slowed.

While the company posted a revenue increase of 8.7 percent on Thursday, less than half the growth rate of in the previous three months and missing estimates, its operating profit still advanced 35 percent in the quarter to €795 million ($923 million), beating analyst expectations.

“We delivered another set of strong results and are fully on track to achieve our ambitious 2017 financial targets,” chief executive Kasper Rorsted said in a statement. “We are even more pleased with the quality of our growth.”

The sporting-goods industry this year has been a tale of divergence. Under Armour Inc. posted its first sales decline since it went public last month, while Puma SE, like Adidas, is benefitting from a trend toward more sportswear worn outside of gyms, prompting it to lift its profit forecast three times this year.

Adidas said its gross margin reached a record 50.4 percent, and revenue in North America grew 19 percent to €1.1 billion, an all-time high.

Amazon.com Inc. is also moving into private-label sportswear, setting the stage for further upheaval in the US, where Adidas’s Reebok brand is already struggling to turn a profit.

Sales of footwear advanced 14 percent in the quarter as Adidas sold more expensive products. While sales of Adidas-brand products jumped 10 percent, those of Reebok declined, and Rorsted said it may take until next year for the brand to grow again.

“The rate of revenue and earnings growth is likely to moderate after two and a half years of super-cycle,” Piral Dadhania, an analyst at RBC Europe, wrote in a note. “We believe the quality of the margin and profit beat should be well-received by the market.”

For the full year, Adidas reiterated its targets, which call for revenue adjusted for currency swings to rise 17 percent to 19 percent, and net income to advance by as much as 28 percent.

Adidas completed the divestment of its CCM ice hockey business to Birch Hill Equity Partners in September. It completed selling its TaylorMade, Adams and Ashworth golf brands to KPS Capital Partners in October.

By Richard Weiss; editors: Eric Pfanner, Thomas Mulier and John J. Edwards III
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