Is Adidas Waking Up From Its Long U.S. Nightmare?
German sportswear company Adidas (ADDYY) seems to be waking up from its long U.S. nightmare.
The company raised its profit and revenue outlook for the year Thursday after announcing better-than-expected results for the third quarter which drove its shares up 5.5% to a new 18-month high.
A strong performance in North America and China was responsible for much of the improvement. After stripping out the effect of the euro’s fall against the dollar this year, sales in North America rose 6% in the quarter after a flat first half. (For much more about Adidas’ efforts to revive its U.S. business with the help of celebrity designers, read: Can Kanye West save Adidas?)
Even Adidas’ chronically under-achieving TaylorMade golf unit finally posted a rise in sales. It still intends to cut the unit’s staff by around 14%, and it admits that this will hit profits this year, but says it will boost them from next year onwards.
In China, sales were up 15% in currency-neutral terms, in another indication of how the country’s consumer sector is holding up despite the well-documented problems at its industrial and real estate companies. In Latin America, sales were up 12% adjusted for foreign exchange. Russia, stuck in recession, was the only outlier, where sales fell 9%.
The German company had expected sales growth of around 5% this year, but now expects it to be a little under 10%. Underlying earnings will rise around 10% from last year’s €642 million.
“The investments into our brands and a leaner golf organization will directly fuel next year’s top- and bottom-line performance and set us up for sustainable profitability improvements from 2016 onwards,” chief executive Herbert Hainer said in a statement.
Adidas also said it will extend to 2019 the contract of global sales director Roland Auschel, tipped by many to take over when Hainer steps down in 2017.