German sportswear manufacturer Adidas records strong growth in China business

BERLIN - German sportswear manufacturer Adidas recorded a "strong growth" in China with an increase in turnover of 16 percent in the first quarter (Q1) of fiscal year 2019, the company announced on Friday.

Total turnover amounted to around 5.9 billion euros ($6.6 billion) in Q1, marking a currency-adjusted increase of 4 percent. This development would have been based on an increase in sales of the brand Adidas, driven by the Sport Inspired and Sport Performance divisions, according to the German sportswear manufacturer.

"We had a successful start to the year, delivering double-digit sales increases in our strategic growth areas Greater China and e-commerce as well as another strong profitability improvement," commented Kaspar Rorsted, chief executive officer (CEO) of Adidas.

In Russia and emerging markets, Adidas also saw strong increases in sales with 22 percent and 10 percent respectively.

The direct-to-customer business of Adidas also developed particularly strongly with "double-digit growth rates", supported by e-commerce where sales grew by 40 percent in the first quarter.

Subsidiary Reebok, however, reported a currency-adjusted decline of 6 percent in turnover "despite growth" in its Classics division in Q1, Adidas announced.

In Q1, Adidas' operational profit margin increased to 14.9 percent mainly due to a higher gross margin, "which more than offset the investment-led increase in other operating expenses", according to Adidas. The higher margins of the German sportswear company were attributable to lower sourcing costs, favorable currency developments as well as a better product and distribution channel mix.

"We confirm our full-year outlook and remain confident about the top-line acceleration in the second half of the year. 2019 will be an important milestone toward achieving our 2020 targets," forecast Rorsted.

Adidas is expecting its turnover to increase by 5 to 8 percent in the fiscal year 2019. In addition, the operational profit margin is set to increase by 0.5 to 0.7 percentage point to up to 11.5 percent for the whole fiscal year.

Investors on the stock market reacted positively after the publication of Adidas' quarterly figures. Shares of the German sportswear manufacturer temporarily increased by over 6.5 percent and were the clear winner in the German stock index DAX. With a price tag of over 240 euros per share, Adidas shares are currently the most expensive shares in the DAX.