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Top-End Shoe Sale Drives Adidas To Increase 2018 Profit Outlook

Top-End Shoe Sale Drives Adidas To Increase 2018 Profit Outlook
A drop in sale in Western Europe forced the German sportswear and fashion firm Adidas to reduce its target for revenues for the entire year of 2018 even though the company also simultaneously increased its profit forecast for the same period on the basis of increased sale of its top-end sports shoes.
Enhancement of profitability at Adidas has been the recent focus of its Chief Executive Kasper Rorsted. While sales has sometimes been higher, the profitability of the German firm has been trailing that of its bigger rival Nike since Rorsted adopted the role of the CEO back in 2016. The strategy for increasing profitability at Adidas includes simplification of the product range and pursuing an aggressive ecommerce strategy which have higher margins because of reduced operational costs.
Following the announcement by Adidas that it expects its net income from continuing operations to continue to rise by between 16 and 20 per cent to be anywhere between 1.66 billion to 1.72 billion euros ($1.90-1.97 billion) against the previous guidance of the company of between 13 and 17 per cent, the shares of the company rose by 1.9 per cent. In the last one year, the share value of the company has risen by 12 per cent. 
Despite this, the company brought down its target for currency-neutral sales growth for the entire year of 2018 to between 8 to 9 per cent from "around 10 per cent".
It has been a seesaw ride in the competition between the German firm and its US rival Nike. While the German firm has been able to claw back some market share in North America from Nike, the US firm has been aggressively pushing its business in Europe Middle East and Africa and gaining share in these markets riding on an increase in popularity of soccer.
Last month, projection for full-year sales and operating profit was raised Adidas’ German rival Puma based on strong sales growth in the third quarter in the Americas and Asia and announced the market receiving very well its first basket ball shoes in 209 years.
On earlier occasions, warnings of challenges to sale in Western Europe was issued by Adidas and said that the second half sale in the region could be flat primarily because the German firm had failed to launch new products in the market there.
In its latest announcement, Adidas reported a drop of 1 per cent in currency-adjusted sales in the region for the third quarter while there was an increase of 16 per cent in North America and 15 per cent in Asia-Pacific for the same. There was a very significant increase in its ecommerce sales (76 per cent) during the third quarter of the current year.
The company remained short of meeting analysts expectation in its third-quarter currency-adjusted sales even though the company reported an increase of 8 per cent at 5.873 billion euros. Net profit from continuing operations increased by 19 per cent to reach 656 million euros, which was more than the estimates of analysts.

Christopher J. Mitchell

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