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


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.