Adidas again increased its outlook for the year while reporting strong preliminary second-quarter results.
Reported revenues from the company’s continuing operations increased 19 percent on a currency-neutral basis in the quarter and 20 percent in euro terms to €5.0 billion. The company’s operating profit increased 18 percent to €505 million in the second quarter of 2017, up from €429 million in the same period a year ago.
The increase came despite the one-time gain of around €70 million related to the early termination of the Chelsea FC sponsorship that was included in the prior year’s quarter. The operating profit improvement was driven by a higher gross margin as well as operating expense leverage.
Net income from continuing operations increased 16 percent to € 347 million during the quarter compared to €301 million last year.
As previously announced, due to the existence of signed agreements to divest the TaylorMade, Adams Golf, Ashworth and CCM Hockey brands, the results from these businesses are reported as discontinued operations. In the second quarter, the TaylorMade and CCM Hockey divestitures had a non-operational negative impact on discontinued operations of around €200 million. At the same time, the company’s continuing operations, which now mainly consist of the Adidas and the Reebok brand, were not affected.
Due to the strong first half year performance, the company has increased its 2017 financial outlook.
Management now projects currency-neutral sales to grow at a rate between 17 percent and 19 percent in 2017 (previously: to increase by between 12 percent and 14 percent compared to the adjusted 2016 net sales of €18.483 billion for the company’s continuing operations).
Furthermore, the company forecasts a year-over-year gross margin improvement during the second half of 2017 and expects to continue to generate operating leverage throughout the remainder of the year. As a result, net income from continuing operations is now forecasted to increase at a rate between 26 percent and 28 percent in 2017 to a level between €1.360 billion and €1.390 billion. This compares to the original guidance as provided in March of an increase of between 13 percent and 15 percent to a level between €1.200 billion and €1.225 billion for the company’s net income from continuing operations.
More details on the company’s second quarter performance as well as on the improved outlook will be given with the publication of the quarterly results on August 3.