Source: Company reports

German athletic and sportswear company Adidas Group reported a FY15 revenue increase of 16.4%, to €16.9 billion, beating the consensus estimate. Revenues grew by 10% at constant exchange rates. The strong revenue increase was underpinned by double-digit sales growth in most of the group’s markets around the world. Net income rose by 29.3%, to €634 million, and EPS grew by 34.0%, to €3.15, but both missed consensus estimates, which were €688 million and €3.30, resSpectively. Income growth was mainly due to better gross and operating margins through the year. The SG&A margin grew by 41 basis points due to the company’s increased investment in marketing and promotional activities. In order to increase brand desirability, the group spent more on point-of-sale marketing and other overheads related to logistics, sales and central administration.

Sales by Brand

In terms of brands, Adidas showed the strongest sales growth, with sales up 12.3%, to €13.9 billion. Reebok and Reebok-CCM Hockey sales grew by 5.9% and 8.1%, respectively. Sales of the TaylorMade-adidas Golf brand, however, fell 13.2%. (All changes mentioned are at constant currency.)

Sales by Region

Across the group’s regions of operation, Greater China exhibited the strongest sales growth, at 17.7%, closely followed by Western Europe, at 17.4%. The Middle East, Africa and Asia region and Latin America also exhibited double-digit sales growth, of 13.6% and 11.9%, respectively. North American sales were less strong, at 5.3%, and sales in Russia and Japan weakened, by 10.6% and 0.2%, respectively. (All changes mentioned are at constant currency.)

4Q15 Results

In the fourth quarter, the group’s sales increased by 15.4% year over year, to €4.17 billion, above the consensus estimate of €4.12 billion. The company narrowed its net loss by 68.6% from the year-ago period, to €44 million, missing the consensus estimate of a net loss of €22 million. The reported loss per share was €0.22 for the quarter, which was down 67.4% year over year but below the consensus estimate of €0.10. Adidas stated that planned increases in other operating expenses more than offset the high gross margin it achieved in the quarter, leading to a net operating loss of €24 million.

FY16 Outlook

The group expects sales to increase by 10%–12% at constant currency in FY16. It anticipates that major sporting events (such as the UEFA EURO 2016), increased marketing and brand-building activities, and new products in its pipeline will all help provide the boost needed to meet its sales target. Management anticipates that net income will also grow by 10%–12%, to around €800 million, in FY16. The consensus estimate for FY16 sales is €18,179 million, lower than the company’s guidance of €18,607–€18,945 million, while the consensus for net income is €801.1 million, higher than company’s guidance of €800.0 million.