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Adidas lifts 2016 forecast after beating 2015 targets

Thursday, February 11, 2016 - 16:44
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German sportswear company Adidas expects sales and operating profit to rise faster this year than previously forecast after it beat targets for 2015 as a big hike in marketing paid off.

[BERLIN] German sportswear company Adidas expects sales and operating profit to rise faster this year than previously forecast after it beat targets for 2015 as a big hike in marketing paid off.

Adidas said it now expected currency-neutral sales and operating profit to both grow by at least 10 per cent in 2016 after predicting in November that they should rise at a high single-digit rate - the same forecast it had given for 2015.

Adidas shares, which have managed to escape the 17 per cent fall of the broader German blue-chip index so far this year, were up 4.2 per cent at 0805 GMT, the only risers on a weaker DAX following the unscheduled statement.

The sportswear industry is enjoying strong demand as consumers around the world adopt healthier lifestyles and wear sports-inspired styles on a daily basis, not just to the gym.

However, Adidas, which announced last month that Henkel's Kasper Rorsted will take over as chief executive in October, has been losing market share to bigger rival Nike, prompting it to boost spending on marketing.

It agreed a record deal to oust Nike as provider of soccer kit for Premier League Manchester United and has made a big push in North American sports, signing top National Football League (NFL) players as well as celebrities like Kanye West.

Adidas said investments in brand building rose by more than 20 per cent in 2015, helping sales growth accelerate in North America and western Europe in the fourth quarter, while staying at over 10 per cent in emerging markets including China.

"In combination with the positive feedback from customers on our 2016 product line-up, this gives us every confidence that we will again grow the top and bottom line at a double-digit rate," chief executive Herbert Hainer said.

Both Adidas and Nike have bucked the broader slowdown in China that has hit luxury goods retailers hard.

Due to an expected rise in sourcing costs from Asia from the stronger US dollar and increasing wages, Adidas reiterated it expects to keep its operating margin at least stable in 2016.

Adidas, which is due to publish full results on March 3, said unaudited figures showed 2015 sales rose a currency-neutral 10 per cent to 16.9 billion euros (S$26.5 billion), while net income from continuing operations rose 12 per cent to 720 million euros.

It added that net income was hit by non-operational goodwill losses of 34 million euros related to the company's Russian and Latin America units.

REUTERS