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Adidas Raises Forecasts as New CEO Plans Fast-Fashion Focus

Adidas' new CEO plans to overhaul the Reebok brand, relocate its head office, close stores and trim jobs as he seeks to turn around a business that’s weighed on the sporting-goods maker for years.
Adidas store | Source: Shutterstock
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  • Bloomberg

FRANKFURT, Germany — Adidas raised its sales and earnings forecasts through 2020 as new chief executive officer Kasper Rorsted seeks to transform the German sportswear maker's namesake label and Reebok into fast-fashion businesses and jettisons underperforming units.

The shares surged to a record as the company said profit should rise 20 percent to 22 percent a year on average through 2020, compared with a previous projection for growth of about 15 percent. Adidas said it’s still trying to sell its TaylorMade golf unit after almost a year of looking and also will divest the CCM hockey business.

The increased forecasts add to the momentum of a business that raised its outlook four times last year, providing a springboard for Rorsted after he took the reins from longtime CEO Herbert Hainer about six months ago. Adidas’s new leader said Wednesday he plans to “over-invest” in the US to catch up with rival Nike Inc. He also wants to speed production so the company can get clothes to stores faster and sell more goods at full price and plans to quadruple online sales to €4 billion ($4.2 billion) by 2020.

“The increase in the long-term targets will be especially taken well, proving management’s confidence,” wrote Zuzanna Pusz, an analyst at Berenberg.

The shares gained as much as 7.3 percent to an all-time high of €171.45 in early Frankfurt trading, the biggest advance in Germany’s benchmark DAX Index.

As well as raising its long-term goals, Adidas gave a 2017 forecast ahead of analyst estimates. Net income from continuing operations will rise 18 percent to 20 percent to as much as €1.23 billion ($1.3 billion), it said. The average analyst estimate is €1.15 billion. Profit rose 41 percent in 2016, exceeding €1 billion for the first time.

Adidas said the sale process for its TaylorMade, Adams and Ashworth golf brands is continuing as it begins to seek a buyer for the CCM hockey unit. The company has been seeking to sell the golf business since May and Rorsted had predicted the process would be concluded by the end of 2016.

The CEO plans to overhaul the Reebok brand, relocating its head office, closing stores and trimming jobs as he seeks to turn around a business that’s weighed on the sporting-goods maker for years.

By Richard Weiss and Thomas Mulier; editors: Eric Pfanner and Paul Jarvis.
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