North America and China drive Adidas growth but Reebok slips

[BERLIN] German sportswear firm Adidas reported better-than-expected first-quarter net profit on Thursday as sales grew rapidly in China and North America, although its Reebok business continued to struggle.

Kasper Rorsted, who took over as chief executive in 2016 after a series of profit warnings, has put a stronger focus than his predecessor Herbert Hainer on improving profitability at Adidas, which still lags bigger rival Nike.

Net profit rose 17 per cent to 542 million euros (S$866.1 million) as sales grew a currency-adjusted 10 per cent to 5.55 billion euros.

The net profit figure exceeded an average analyst forecast for 510 million euros in a Reuters poll, but sales were slightly shy of consensus for 5.59 billion euros.

Adidas said sales had risen 21 per cent in North America, where it has been taking market share from Nike and Under Armour, and 26 per cent in greater China, but fell 16 per cent in Russia. Ecommerce sales rose 27 per cent.

Nike last month signalled it expects an end to its revenue declines in North America as the world's largest footwear maker reaps the benefits of its efforts to sell directly to customers and focus on new launches.

However, Under Armour on Tuesday forecast a bigger-than-expected loss for the second quarter, taking the shine off first-quarter sales that topped Wall Street estimates, as it spends heavily on an overseas expansion.

Adidas said sales at loss-making fitness brand Reebok fell 3 per cent due to declines in the training and running categories, although it did manage to return to currency-adjusted growth in North America.

Adidas confirmed its 2018 forecast for currency-neutral sales to rise around 10 per cent in 2018, with an operating margin of between 10.3 and 10.5 per cent, up from 9.8 per cent in 2017, but still behind Nike's almost 14 per cent.

REUTERS