Adidas CEO: Still have huge opportunity ahead in US and China
Source: CNBC Business
Sports apparel maker Adidas reported better-than-expected earnings on Thursday, thanks to growth in online trading and a boost to its North American and Chinese performance; however, its chief executive thinks there’s still “tremendous opportunity” ahead when it comes to the two markets.
“We’ve had three great years in the U.S. and we have a long way ahead of us,” Kasper Rorsted, chief executive of Adidas, told CNBC on Thursday.
“Right now we’re building market share and key franchises, and the pricing we have right now is appropriate; but we need to make sure that we maintain a very strong growth also for the quarters to come and that I’m quite confident about.”
In the first quarter, the firm saw net profit climb 30 percent to 455 million euros ($497 million), while sales grew to 5.67 billion euros; both of which topped analyst expectations of 421 million and 5.4 billion respectively, according to Reuters.
Here are some of the highlights from Adidas’ Q1 earnings:
- Quarterly net profit reached 455 million euros, beating average analyst expectations of 421 million euros
- Adidas confirmed its full year outlook for 2017, anticipating sales to grow between 11 to 13 percent
- In e-commerce, revenues rose 53 percent in Q1
Delving into the report, the Reebok brand saw a rebound with sales rising 13 percent in the quarter, however the CEO said it was “far too early” to call it a brand turnaround. To see an eventual brand turnaround, Rorsted said Adidas was taking a number of initiatives to boost Reebok, including getting the right retailers and growing its online channel.
Sticking with e-commerce, revenues popped 53 percent helping lift first quarter results, with the CEO telling CNBC that Adidas would continue to invest heavily into its digital channels, to drive the right demand. In March, Adidas said while e-commerce revenues hit 1 billion euros last year, it hopes this figure will climb to 4 billion euros by 2020.
Need to focus on implementing 2020 plan
While Adidas saw revenue rise in almost all of its markets, North America and Greater China saw the greatest of gains, with both consumer regions increasing by 30 percent or more. Russia, however, saw sales fall 10 percent, which the group attributed to store closures and “challenging consumer sentiment” in the region.
When asked whether he believed Adidas’ growth in North America and China was sustainable, Rorsted said he believed it could be maintained in the medium term, however, he added that there was still room to develop.
“I still think we have a huge opportunity ahead of us in the U.S.. We are 3.5 billion in the U.S., we need to at least get to 5 (billion) by 2020. We’re more than 3 (billion) in China, we need to get to 5 or 6 billion also. So I do think there’s tremendous opportunity for Adidas in both markets also for the years to come.”
At present, Adidas has a 2020 acceleration plan in place called “Creating the New”, which aims at speeding up currency-neutral sales by 10 to 12 percent on average each year until 2020. For 2017, the group confirmed its forecast on Thursday, with Adidas hoping to deliver double-digit revenue growth.
“Four years is a long time. We’re off to a good start in 2017 but 2020 is a long way from now and we just really need to get really focused on executing this strategic plan we have. And then 2020 will come, but it’s early days still.”