Adidas shares jump on buyback, profit optimism
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[March 14, 2018]
By Emma Thomasson
HERZOGENAURACH, Germany (Reuters) - Shares
in German sportswear firm Adidas <ADSGn.DE> soared on Wednesday after it
announced a big buyback, gave an upbeat outlook for 2018 and lifted its
2020 profitability forecast, while conceding it would be hard to match
rival Nike's margins.
Adidas said late on Tuesday it plans to buy back up to 3 billion euros
($3.7 billion) of its shares, or almost 9 percent of its share capital,
by 2021 on top of a higher-than-expected 2017 dividend of 2.60 euros per
share.
The company's online sales leaped 57 percent in 2017 to 1.5 billion
euros, or about 7 percent of sales.
The company's shares, which had fallen 15 percent in the past six months
as sales growth cooled, were up 10 percent at 1206 GMT, the top gainer
on Germany's blue-chip index <.GDAX>.
"(20)18 will be a good year for us...ensuring we get the right balance
of market share growth and margin growth...to get us closer to where
some of our competitors are," Chief Executive Kasper Rorsted told a news
conference.

After a tough few years, Adidas has returned to form under Rorsted,
taking market share from bigger rival Nike <NKE.N> in North America and
selling its underperforming TaylorMade golf and CCM Hockey brands.
Since taking over in 2016, Rorsted has put a sharper focus on improving
profitability, which still lags Nike.
Finance chief Harm Ohlmeyer, who used to lead the Adidas ecommerce
business, told the news conference it would be hard to close the gap
completely given Nike's dominance of the U.S. market, but he said online
sales were helping margins.
Rosted said there was still huge potential to increase online sales
further given that ecommerce accounts for about 15 to 20 percent of
sales for the global sporting goods market.
Adidas forecast currency-neutral sales would rise around 10 percent in
2018, with an operating margin of between 10.3 and 10.5 percent, up from
9.8 percent in 2017. Nike reported an operating margin of 13.8 percent
for its 2016/17 fiscal year.
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Adidas sport shoes are seen before the company's annual news
conference in Herzogenaurach, Germany March 14, 2018.
REUTERS/Michael Dalder

WORLD CUP BOOST
Adidas expects a boost from the 2018 soccer World Cup, although Rorsted noted
that the event has less impact than before as soccer now accounts for less than
10 percent of sales.
He said the company had no plans to boycott the tournament despite rising
political tension between the West and Russia: "Isolation is not the best way to
resolution," he said.
Adidas lifted its forecast for the operating margin to hit 11.5 percent by 2020,
up from a previous forecast of 11 percent. Rorsted highlighted steps to improve
efficiency, such as more global purchasing, shared business services and fewer
products.
Fourth-quarter sales rose 12 percent to 5.06 billion euros, missing analyst
forecasts for 5.13 billion as sales in Russia and at its Reebok brand slipped.
It reported operating profit more than tripled to 132 million euros, beating
analyst forecasts for 61 million, but recorded a net loss of 41 million after a
tax impact of 76 million due to changes in the U.S. tax code.
Rorsted said a turnaround plan he launched for loss-making Reebok was bearing
fruit, with the brand expected to return to growth in North America in 2018.
"While the slowdown in organic growth is going to raise some questions today,
confidence on the profitability progression implies a continued superior growth
potential," said Morgan Stanley analysts, who rate the stock "equal-weight".
($1 = 0.8063 euros)
(Reporting by Emma Thomasson; Editing by Keith Weir and Adrian Croft)
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