Wednesday, March 8, 2017

Adidas Shares Jump On Upbeat Growth Outlook

By Natascha Divac
MarketWatch
March 8, 2017

Shares in Adidas AG soared Wednesday after the German sportswear maker issued a surprisingly upbeat outlook and raised its 2016 dividend.

Adidas posted a narrower quarterly net loss, beating analyst expectations, and said it expects 2017 sales to increase between 11% and 13% and net income by 18% to 20%.

"This is above our as well as market expectations and therefore we see uplift potential," said Volker Bosse, an analyst at Baader Helvea Equity Research.

The company's shares were up 7.3% in morning trading.

Adidas is in the midst of an overhaul focused on shedding underperforming operations and beefing up results in its important U.S. market, where it competes with Nike Inc. and Under Armour Inc. Since taking over as chief executive in October, Kasper Rorsted has also made a priority of boosting the company's Reebok brand, which has been a drag on profitability.

Adidas on Wednesday said it aimed to accelerate sales and earnings growth until 2020, and now sees currency-neutral sales increasing at a rate between 10% and 12% a year on average through 2020. Previously, it saw an increase at a high-single-digit rate.

Net income from continuing operations is projected to grow between 20% and 22% a year on average in the period. Previously, Adidas predicted an increase of around 15% on average.

A trader said the market was also surprised by Adidas's forecast that its 2017 gross margin would rise to as much as 49.1%. In 2016, that margin was 48.6%.

"Profitability is seen increasing at a significantly higher pace than expected," the trader said.

The sportswear maker proposed to raise its dividend to EUR2.00 from EUR1.60.

Adidas's net loss in the three months ended December narrowed to EUR10 million ($10.57 million) from a EUR44 million loss a year earlier, beating analyst expectations for a loss around EUR19 million. Sales increased to EUR4.69 billion from EUR4.17 billion, boosted by double-digit growth in its running category.

"Building on our 2016 performance, our momentum continues and we will again achieve strong top- and bottom-line improvements in 2017," said Mr. Rorsted.

The company said it would continue to sharpen its focus on its Adidas and Reebok brands and whittle away at its noncore operations. It is now seeking a buyer for its ice hockey brand CCM Hockey, and said the sale process for golf brands TaylorMade, Adams Golf and Ashworth is on track.


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