In 2017, adidas delivered a year of strong performance, increasing currency-neutral revenues by 16%. This development mainly reflects an 18% increase at brand adidas, which was mainly driven by double-digit sales increases in the running category as well as at adidas Originals and adidas neo.  In addition, high-single-digit sales increases in the training category also contributed to this development.

Revenues at the Reebok brand grew by 4%, driven by double-digit sales increases in Classics, as well as low-single-digit growth in the running category. While the brand's international revenues grew at a double-digit rate in 2017, sales in the US declined, reflecting the significant amount of store closures in the market. In euro terms, sales for the company were up 15% to EUR 21.218 billion in 2017 from EUR 18.483 billion in 2016.

“2017 was a strong year – financially and operationally. We made great progress toward achieving our mission to be the best sports company in the world. Our strategic growth areas - North America, Greater China and Digital Commerce - were the main drivers of our performance,” said adidas CEO Kasper Rorsted.

“2018 is a key milestone on the road to achieving our long-term targets for 2020. We expect quality growth, with overproportionate bottom-line improvements. This will enable an even stronger increase in profitability by 2020 and allows us to upgrade our long-term target yet again.”

Double-digit growth

On a currency-neutral basis, the combined sales of the adidas and Reebok brands grew at double-digit rates in nearly all regions. Growth in the company's key regions Greater China and North America was particularly strong, with currency-neutral sales increases of 29% and 27%, respectively.

While currency-neutral revenues in Western Europe increased by 13%, sales in Latin America were up 12%. Currency-neutral revenues in MEAA and Japan increased by 10% each. Sales in Russia/CIS declined by 13%, reflecting the ongoing challenging consumer sentiment as well as additional store closures during the year.

Operating margin

The company’s gross margin increased by 1.2 percentage points to 50.4%. This development was due to the positive effects from a better pricing and product mix. While other operating income declined by 49% to EUR 133 million, reflecting the non-recurrence of two one-time gains in 2016, other operating expenses were up by 13% to EUR 8.882 billion. This development reflects an increase in marketing expenditure, as well as higher operating overhead expenditure.

Basic EPS from continuing operations increased 31% to EUR 7.05 from EUR 5.39 in 2016. Losses from discontinued operations, mainly related to the divestiture of the TaylorMade and CCM Hockey businesses, amounted to EUR 254 million. As a result, net income attributable to shareholders, excluding the negative one-time tax impact, grew by 15% to EUR 1.173 billion.

Net cash amounted to EUR 484 million, representing an improvement of EUR 587 million compared to the prior year. This development was driven by the increase in cash generated from operating activities, as well as proceeds arising from the disposal of TaylorMade and CCM Hockey, partly offset by the utilisation of cash for the purchase of fixed assets as well as the dividend paid to shareholders and the repurchase of adidas AG shares.

Outlook 

The company expects sales to increase at a rate of around 10% on a currency-neutral basis in 2018. Currency-neutral revenues are projected to grow at double-digit rates in North America and Asia/Pacific, while currency-neutral sales in Western Europe and Latin America are forecast to improve at a mid-single-digit rate each. In addition, currency-neutral revenues in Emerging Markets are expected to grow at a low-single-digit rate.

The company's gross margin is forecast to increase up to 0.3 percentage points to a level of up to 50.7%. This, together with a forecast decline in other operating expenses as a percentage of sales, is expected to drive an increase in operating profit of between 9% and 13%. Consequently, the company projects the operating margin to increase between 0.5 and 0.7 percentage points to a level between 10.3% and 10.5%. Net income from continuing operations is projected to increase to a level between EUR 1.615 billion and EUR 1.675 billion.

Following the strong operational and financial performance in 2017, the company has also upgraded its 2020 profitability target. While adidas continues to forecast currency-neutral revenues to grow between 10% and 12% on average per year between 2015 and 2020, the company now projects net income from continuing operations to grow by an average of 22% to 24% per year between 2015 and 2020.

www.adidas-group.com