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Adidas swings to profit in Q4'18 but warns supply problems will hurt 2019 growth

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Adidas swings to profit in Q4'18 but warns supply problems will hurt 2019 growth

Adidas AG on March 13 said it swung to a profit in the fourth quarter of 2018 but warned that growth in 2019 would be restrained by supply-chain problems that would prevent it from meeting demand.

"While the company is experiencing a strong increase in demand for mid-priced apparel, adidas will not be able to immediately cover this demand in full due to supply chain shortages," the company said in a statement. "Consequently, growth is expected to be negatively impacted, particularly in North America during the first half of the year."

As a result, the maker of athletic and sports lifestyle products said the impact on full-year growth was expected to be between 1 and 2 percentage points.

The company, based in Herzogenaurach, Germany, projected sales in 2019 would increase at a rate of between 5% and 8% on a currency-neutral basis. Sales in the Asia-Pacific region are forecast to grow at a double-digit rate, while sales in North America and emerging markets are expected to grow at high-single-digit rates. In Europe, sales are projected to return to growth.

Net income is forecast to increase to between €1.88 billion and €1.95 billion, an increase of between 10% and 14% from 2018.

For 2018, net income attributable to Adidas shareholders, which includes income from continuing operations and losses from discontinued operations, jumped to €1.70 billion from €1.17 billion in 2017, surpassing the S&P Global Market Intelligence consensus GAAP net income estimate of 1.69 billion.

GAAP diluted EPS for the year rose 56.5% to €8.42 from €5.38. Net sales were up 3.3% to €21.92 billion from €21.22 billion.

In the fourth quarter ended Dec. 31, 2018, Adidas reported that GAAP net income attributable to shareholders swung to a profit of €108 million from a loss of €41 million in the same period a year earlier. GAAP diluted EPS climbed to 54 cents from a loss of 20 cents.

Net sales rose 3.5% year over year to €5.23 billion from €5.06 billion. The performance was fueled by a 5% growth in demand for the company's namesake brand while revenue at its Reebok brand shrank 1%. Sales in the Asia-Pacific region rose 11% year over year and were ahead 9% in North America. They fell 5% in emerging markets and 6% in Europe.

Adidas said its net cash position improved to €959 million at Dec. 31, 2018, compared with €484 million a year earlier. At its annual general meeting May 9, it said it would recommend a dividend of €3.35 per share, a 29% jump from €2.60 in 2017.