Adidas Releases Its Annual Earnings Report And Expects Supply Chain Problems To Restrict Sales Growth In Fiscal 2019.

In March 13th, the German sports giant Adidas (Adidas) group recently announced its fourth quarter and full year financial results in fiscal 2018, driven by the two digit growth in North America, Greater China and online business, with year-on-year net sales rising 3.3% to a record 21 billion 915 million euros.

Adidas's chief executive, Kasper Rorsted, said: "record sales, the highest profit margins in history, and strong net profits represent the success of Adidas in fiscal 2018.

Our strategic growth momentum is North America and China's business, and the two digit growth of the electricity business again.

In 2019, we will continue to promote the implementation of the "Creating the New" plan to promote sustained growth in performance.

In the fourth quarter, Adidas achieved strong growth in sports, leisure and training and running categories, but football business declined sharply.

This is mainly due to the previous quarter's Adidas sponsored World Cup qualifier Team Jersey to promote sales, resulting in a relatively high base.

But the company expects that the shortage of supply chain will bring resistance to the growth of sales in 2019.

When the news came out, Adidas's share price fell more than 5% on the day to 197.25 euros per share, closing at 204.8 euros per share.

Nevertheless, its stock price rose 22% last year.

As of the fourth quarter of December 31, 2018, the core financial data of adidas Group are as follows:

Net sales rose 3.5% to 5 billion 234 million euros, an increase of 5% over the same period last year, unchanged at an exchange rate of 5 billion 56 million euros, exceeding the average 5 billion 200 million euros forecast by analysts.

Gross profit rose 4.6% to 2 billion 732 million euros.

Gross profit margin increased 0.5% to 52.2%

Operating profit fell 2% to 129 million euros.

Net profit was 108 million euros, a loss of 41 million euros in the same period last year, and 88 million euros beyond analysts' average forecast.

By Region:

At constant exchange rate,

Net sales in the Asia Pacific region increased 10.7% to 1 billion 665 million euros, mainly driven by 13% growth in the Greater China region net sales year-on-year.

Net sales in North America grew 8.6% to 1 billion 297 million euros, mainly driven by the two digit growth of Adidas brand.

European net sales fell 5.7% to 1 billion 216 million euros.

Net sales in Latin America fell 1.2% to 447 million euros.

Russia's net sales fell 1.9% to 132 million euros.

Net sales in emerging markets fell 5.3% to 256 million euros.

By brand:

Adidas brand net sales increased 3.8% to 4 billion 736 million euros.

Reebok brand net sales fell 2.6% to 423 million euros.

For the full fiscal year ended December 31, 2018, the core financial data of adidas Group are as follows:

Net sales rose 3.3% to 21 billion 915 million euros, an increase of 8% over the same period last year, compared with 21 billion 218 million euros in the same period last year.

Gross profit rose 6.2% to 11 billion 363 million euros.

Gross profit margin increased 1.4% to 51.8%

Operating profit increased 14.4% to 2 billion 368 million euros.

Net profit rose 55% to 1 billion 704 million euros, compared with 1 billion 100 million euros last year.

The cash flow was 959 million euros, 484 million euros in the same period last year

Management proposes to increase dividends by 29% to 3.35 euros per share.

By Region:

At constant exchange rate,

Net sales in the Asia Pacific region increased 14.9% to 7 billion 141 million euros, mainly driven by 23% growth in the Greater China region net sales year-on-year.

Net sales in North America increased 14.9% to 4 billion 689 million euros.

European net sales fell 0.4% to 5 billion 885 million euros.

Net sales in Latin America grew 5.6% to 1 billion 634 million euros.

Russia's net sales rose 1% to 595 million euros compared with the previous year, and the positive impact of sales related to the world cup offset the negative impact of the closure of a large number of stores.

Net sales in emerging markets fell 3.1% to 1 billion 144 million euros.

By brand:

Adidas brand net sales increased 4.5% to 19 billion 851 million euros.

Reebok brand net sales fell 8.5% to 1 billion 687 million euros.

Looking forward to the 2019 fiscal year, adidas Group expects:

With constant exchange rate, annual net sales growth is between 5% and 8%.

Although consumer demand for medium priced clothing is growing strongly, adidas Group is unable to make up for this demand due to the shortage of supply chains.

Therefore, this is expected to have a negative impact on the growth of annual sales. The overall impact will be between 1% and 2%, especially in North America in the first half of this year.

The adidas Group expects that the growth rate will be between 3% and 4% in the first half of fiscal year 2019, and will continue to accelerate in the second half of this year as the group will be able to gradually expand its supply over time.

With constant exchange rates, annual sales of all segments will grow.

The Asia Pacific region will grow by two digits. North America and emerging markets will grow in high digits. Latin America and Russia will grow at low digits. Europe is expected to resume growth in the year and predict a slight increase throughout the year.

Gross profit margin is expected to grow to around 52%, and operating profit margins will grow to 11.3% to 11.5%.

The net income of continuing operations is expected to increase to between 1 billion 880 million euros and 1 billion 950 million euros, an increase of 10% to 14%.

Kasper Rorsted explained: "in the past three years, adidas has doubled its business in the United States, and the demand has been increasing.

Adidas's clothing factories are mostly from Kampuchea, China and Vietnam.

But the shortage of supply chain has nothing to do with the tension between China and the US.

Author: Yang Taosheng