Adidas says on track to overcome US supply problems
German sportswear group in line with expectations for second quarter
German sportswear maker Adidas met analyst sales and profit expectations in the second quarter and said it was on track to overcome supply chain problems that are hampering sales in the US and burdened the Nike rival with higher air freight costs.
Adjusted for currency swings, the German sports brand for the second quarter reported a 4 per cent year-on-year revenue increase to €5.5bn, driven by a 37 per cent jump in ecommerce sales and a 14 per cent increase in China.
The operating profit grew at 9 per cent to €643m, as it negotiated better terms with suppliers, sold more high-margin products and scaled back on discounts. Hence the operating margin rose to 11.7 per cent, after 11.3 per cent a year ago.
Reported net income attributable to shareholders rose by a third to €532m in the second quarter, beating analyst expectations as the tax bill in the three months fell 8 per cent.
“The stock has been a star performer in the sector [year-to-date] so there is some risk of a de-rating,” Citigroup analysts wrote in a note to clients, adding that “any weakness [in the share price] will likely prove a good buying opportunity ahead of any acceleration [in the second half of 2019]”. Full-year guidance was confirmed, they added, and investors believe strongly in the group’s business model and management team.
This year, shares in Adidas have risen 49 per cent, compared with a 10 per cent increase of Germany’s Dax 30 blue chip index.
Adidas half-year performance could have been even better had the group not suffered from supply shortages in the US, an issue chief executive Kasper Rorsted flagged to investors in March.
Due to bungled internal planning, Adidas has not been able to meet the higher-than expected demand for mid-priced apparel in the US. In March, the company warned it will lose between €200m and €400m of sales, equating to 1 per cent to 2 per cent of revenue this year, with the main pain to be felt in the first half of the year.
“We remain confident about the sequential revenue acceleration in the second half of the year,” Mr Rorsted staid in a statement on Thursday, adding that the group stands by its previous guidance, expecting a full-year growth of 5 to 8 per cent once currency fluctuations are stripped out.