Yeezy Boost Aids Strong Q3 For Adi­das

The Ger­man ac­tivewear gi­ant in­creased its out­look fol­low­ing a 25 per­cent in­crease in prof­its in the pe­riod.

WWD Digital Daily - - News - BY KATYA FORE­MAN

PARIS — Sus­tained hunger for hype sneaker re­leases has helped keep Adi­das on track, com­ing off a bet­ter-than-ex­pected third quar­ter fu­eled in part by the mil­lion­strong launch of the Yeezy Boost 350 V2 in Septem­ber, the big­gest dig­i­tal re­lease in the com­pany’s his­tory.

The Ger­man sport­ing goods com­pany on Wed­nes­day raised its full-year guid­ance, cit­ing dou­ble-digit in­creases in the pe­riod in strate­gic growth ar­eas — North Amer­ica, Greater China and e-com­merce — de­spite se­vere cur­rency head­winds and a sig­nif­i­cant in­crease in mar­ket­ing in­vest­ments.

E-com­merce sales in the three months ended Sept. 30 spiked 76 per­cent, ver­sus 27 per­cent in the first half, and gen­er­ated around 7 per­cent of to­tal sales. Drag­ging on the per­for­mance was slug­gish growth in Western Europe, im­pacted by fac­tors in­clud­ing aggressive com­pe­ti­tion, over­pric­ing of key sneaker fran­chises and a slow re­ac­tion to trends in the mar­ket.

“A growth driver in the past was the Adi­das Orig­i­nals chan­nel, but we are a sports com­pany. We should have done a bet­ter job of de­vel­op­ing the sports chan­nel in Europe, sim­i­lar to what we’ve done in the U.S., to have a more bal­anced pro­file,” Adi­das chief ex­ec­u­tive of­fi­cer Kasper Rorsted said dur­ing a con­fer­ence call with jour­nal­ists.

Dou­ble-digit and high-sin­gle-digit growth in the Sport In­spired and Sport Per­for­mance cat­e­gories, re­spec­tively, fu­eled a 10 per­cent sales in­crease at Adi­das in the quar­ter, while rev­enues at Ree­bok fell 5 per­cent, im­pacted by de­clines in the Train­ing and Run­ning seg­ment.

The me­dia men­tions and search in­ter­ests for the Yeezy Boost 350 V2 “sur­passed any pre­vi­ous Yeezy re­lease, which helped us drive e-com­merce traf­fic, gen­er­at­ing mil­lions of vis­i­tors to the site,” Rorsted said.

He also high­lighted a new loy­alty pro­gram, Creators Club, launched by the Adi­das brand in the U.S., and giv­ing customers ac­cess to a “set of spe­cials,” which is set to be rolled out to ad­di­tional mar­kets in the com­ing months.

With a line of “next gen­er­a­tion” Ul­tra Boosts due to launch in early 2019, in­clud­ing a se­ries of spe­cial-edi­tion and col­lab­o­ra­tive re­leases in key cities across the world, the Ul­tra Boost fran­chise con­tin­ues to grow in the strong dou­ble dig­its.

The brand’s archives con­tinue to be “a great as­set,” Rorsted said. Re­cently launched hits in­clude the Yung-1 Triple

Black based on the brand’s Fal­con Dorf shoe from the Nineties and the first rere­lease of the Con­ti­nen­tal 80 from the late Eight­ies.

But the 4-D-printed shoe is also a ma­jor “game changer” for the brand, Rorsted added, with the vol­ume at re­tail in­creased by a fac­tor of 10. “We’ve had lines out­side stores for re­cent 4-D re­leases like the Al­phaEdge,” he said.

Adi­das con­tin­ues to make strong progress in the dig­i­tal space, Rorsted said, with the Adi­das app, now avail­able in 17 coun­tries, gen­er­at­ing close to 5 mil­lion down­loads by the end of the third quar­ter.

But the com­pany is also look­ing to

“bring the brand alive in phys­i­cal re­tail through fo­cused in­vest­ments.” Adi­das year-to-date closed 327 stores and opened ap­prox­i­mately 137 doors “where op­por­tu­ni­ties have emerged.”

In terms of brick-and-mor­tar suc­cess sto­ries, Rorsted flagged the re­cently opened Shang­hai Brand Cen­ter on East Nan­jing Road in Shang­hai, built “from con­cept to open­ing” over the space of six months. “That speaks to the speed with which things are hap­pen­ing in Asia, com­pared to the rest of the world,” he said.

In the first days of trad­ing, the store has at­tracted more than 10,000 vis­i­tors per day, with a num­ber of line­ups for lim­ited re­leases. “It has set the bench­mark,” Rorsted noted. “Un­til a week ago, our Fifth Av­enue store was the best in the world.

Now you have to go to China to see the best store in the world.”

Adi­das AG posted a net profit of 659 mil­lion eu­ros in the third quar­ter, up 25 per­cent year-on-year, while sales rose 3 per­cent to 5.87 bil­lion eu­ros, com­pared to 5.67 bil­lion in the same pe­riod last year.

Net in­come in the nine months spiked 40 per­cent to 1.59 bil­lion eu­ros, with sales ris­ing 3.2 per­cent to 16.68 bil­lion eu­ros.

Un­der its re­vised guid­ance, the group’s net in­come from con­tin­u­ing op­er­a­tions is now ex­pected to in­crease at a rate of be­tween 16 per­cent and 20 per­cent in

2018, to be­tween 1.66 bil­lion eu­ros and 1.72 bil­lion eu­ros. This com­pares to a pre­vi­ous fore­cast of be­tween 1.61 bil­lion eu­ros and 1.67 bil­lion eu­ros, rep­re­sent­ing an in­crease of be­tween 13 per­cent and 17 per­cent.

Cur­rency neu­tral rev­enues in 2018 are pro­jected to grow be­tween 8 per­cent and 9 per­cent, below the pre­vi­ous fore­cast of around 10 per­cent, with lower-thanex­pected growth in Western Europe drag­ging on its per­for­mance.

The com­pany’s gross mar­gin is now pro­jected to in­crease by up to 100 ba­sis points to a level of up to 51.4 per­cent.

Based on the solid re­sults and un­der­ly­ing earn­ings growth at Adi­das “that has sur­passed ex­pec­ta­tions for the past few quar­ters,” Pi­ral Dad­ha­nia, an­a­lyst with Royal Bank of Canada, said he views the com­pany’s mar­ket share op­por­tu­nity in North Amer­ica and evolv­ing dis­tri­bu­tion model as “pos­i­tive in the long term.”

Adi­das Orig­i­nals Deerupt

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