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Adidas raises 2020 outlook on FY'17 results

Adidas AG on March 14 raised its 2020 profitability target as it reported strong fourth-quarter and full-year 2017 performances, with North America, Greater China and digital commerce cited as the athleticwear maker's main drivers for growth.

The German company reported net income of €35 million for the 2017 fourth quarter, compared to a year-ago loss of €10 million and ahead of the S&P Capital IQ consensus estimate of 28.2 million. However, when including a one-time negative tax impact of €76 million due to U.S. tax reform, Adidas saw a net loss of €41 million for the quarter.

Diluted EPS from continuing operations came in at 35 cents excluding the tax impact, up 773.2% from 4 cents per share in the year-ago period and beating the S&P Capital IQ EPS consensus estimate of 13 cents.

In euro terms, sales rose 12.4% to €5.06 billion in the quarter, largely driven by combined sales of its Adidas and Reebok brands growing 32% in Greater China and 31% in North America.

For the 2017 full year, net income adjusted to exclude the one-time tax impact and losses from discontinued operations came in at €1.43 billion, compared to €1.08 billion in the prior year and above the S&P Capital IQ consensus estimate of €1.37 billion. The losses from discontinued operations, which were linked to the company's divestiture of TaylorMade and CCM Hockey, amounted to €254 million.

Also excluding the tax impact, full-year diluted EPS from continuing operations rose 32.2% to €7.00 from €5.29 in 2016, ahead of the S&P Capital IQ consensus estimate of €6.77.

The company said revenue growth in 2017 was driven by particularly strong support from e-commerce operations, where revenue grew 57%. In euro terms, sales for the company were up 14.8% to €21.22 billion in 2017 from €18.48 billion in 2016.

For the 2015-2020 period, the German company said it now expects net income from continuing operations to increase between 22% and 24% on average per year, compared with the previous projection of 20% to 22%. As a result, Adidas forecasts an operating margin of up to 11.5% by 2020, from the previous expectation of 11%. The company retained its revenue growth guidance of 10% to 12% on average per year for the five-year period.

For 2018, net income from continuing operations is projected to increase to between €1.62 billion and €1.68 billion, while the operating margin is forecast to increase between 0.5 percentage point and 0.7 percentage point to between 10.3% and 10.5%.

In addition, the executive and supervisory boards of Adidas recommended a dividend of €2.60 per share. If approved at the May 9 annual shareholders meeting, it would be an increase of 30% compared to the €2.00 per share paid in 2016.

The earnings release came shortly after the company announced a €3 billion share buyback program that will run through 2021.