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Adidas' Q2 net profit jumps 15.5% on strong sales across regions and brands

German sportswear maker adidas AG said Aug. 3 that net profit rose 15.5% in the second quarter after sales jumped by double-digit percentages in most regions due to strong demand for running gear and online purchases, and it reiterated its upgraded outlook for 2017.

The Herzogenaurach-based maker of athletics clothing and shoes said net income from continuing operations for the three months ended June 30 rose to €347 million from €301 million in the same period a year earlier while diluted earnings per share from continuing operations increased to €1.70 from €1.47. Net income beat a consensus of analysts' mean estimates of €344 million, while EPS was in line with expectations, according to S&P Capital IQ.

Adidas reported preliminary results July 27 and upgraded its outlook for the year. The company is scheduled to hold a telephone conference call for analysts and investors at 2 p.m. GMT.

Sales grew 20.0% on a reported basis, or 19.0% on a currency neutral basis, to €5.04 billion from €4.20 billion, while operating profit advanced 17.9% to €505 million from €429 million. Sales exceeded the market consensus of €5.02 billion, while operating profit was in line with expectations of €505.15 million.

"Both sales and net income from continuing operations increased strongly," adidas CEO Kasper Rorsted said in a statement. "This is testament to the continued momentum our brands enjoy across our key regions and channels."

Sales expanded by double-digit percentages in all regions except Russia and the Commonwealth of Independent States, where sales dropped 10.7% on a currency neutral basis. Greater China enjoyed the fastest growth of 27.7%, followed by North America at 25.8% and western Europe at 19.3%.

By brand, sales jumped 20.5% on a currency neutral basis for adidas and 4.9% for Reebok. The adidas brand was driven by double-digit increases in the running category, adidas Originals and adidas neo product lines, the company said.

Sales through all distribution channels grew by double-digit percentages, including a 66% revenue surge in e-commerce, Adidas said.

"Adidas continues to deliver results in excess of already elevated expectations, across all categories in all regions, and is positively surprising the market on its ability to continue with its strong top line momentum operating leverage led margin expansion," RBC Capital Markets analyst Piral Dadhania said in an Aug. 3 report. "We expect these trends to continue supported by a strong product offer, focused management team and competitor weakness."

Adidas reiterated its upward revision to its 2017 guidance, adding several details.

"Based on the strong first half performance, we are raising our full-year guidance," CEO Rorsted said. "We'll grow both our top and our bottom line faster than originally anticipated."

The company now expects sales to rise between 17% and 19% on a currency neutral basis, compared with its previous outlook of between 12% and 14%. It also forecasts gross margin to expand 0.8 percentage points to up to 50.0%, compared with its previous expectation of a 0.3 percentage-point increase.

The sportswear maker also said it expects operating profit to rise between 24% and 26%, compared with its previous guidance of between 13% and 15%, backed by an operating margin improvement of up to 0.6 percentage points to a level of up to 9.2%, compared with a previous growth forecast of between 0.2 and 0.4 percentage points.

Adidas reiterated it expects net income from continuing operations to expand between 26% and 28% to between €1.36 billion and €1.39 billion, compared with its March outlook, which called for an increase of between 13% and 15% to between €1.20 billion and €1.23 billion.

The company added it now expects full-year basic earnings per share to increase between 25% and 27%, a faster pace than its previous expectation of between 13% and 15%.