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Adidas Expects Sales, Operating Profit To Rise Faster Than Previously Forecast

Adidas expects sales and operating profit "to rise faster this year than previously forecast" after it beat targets for '15 as a "big hike in marketing" paid off, according to Emma Thomasson of REUTERS. Adidas said it now expected currency-neutral sales and operating profit to both grow by at least 10% in '16 after predicting in November "that they should rise at a high single-digit rate." The brand's shares, which have "managed to escape" the 17% fall of the broader German blue-chip index .GDAX so far this year, were up 4.2% on Thursday. The sportswear industry "is enjoying strong demand as consumers around the world adopt healthier lifestyles" and wear sports-inspired styles on a daily basis, not just to the gym. Adidas said investments in brand building rose by more than 20% in '15, "helping sales growth accelerate in North America and western Europe in the fourth quarter," while staying at over 10% in emerging markets including China (REUTERS, 2/11). BLOOMBERG's Aaron Ricadela reported the increased forecast comes "less than a month" after the company appointed Henkel CEO Kasper Rorsted to succeed Herbert Hainer as CEO. Rorsted is due to join adidas in August, right before the start of the Olympic Games in Brazil. Bryan Garnier & Co. analyst Cedric Rossi said that along with this summer’s Euro 2016 in France, the games will showcase adidas’ brand and "drive demand for sneakers and sportswear." He said in a note, "The two major sporting events occurring this year will be key catalysts for the group" (BLOOMBERG, 2/11). In N.Y., Ellen Emmerentze reported adidas has gained traction in the U.S. lifestyle sector lately, "helped by its cooperation deal with rapper Kanye West and the launch of his Yeezy Boost shoe series." In '15, Adidas Originals, the company’s urban streetwear unit, "was the most-liked sneaker brand on social-media platform Instagram, with 78.8 million likes in the course of the year" (WALL STREET JOURNAL, 2/11). The FINANCIAL TIMES reported while sales "are booming," adidas has cautioned that net profit for '15 "will be hampered by a number of goodwill impairment losses." Full-year results will be released on March 3 but the company said on Thursday, "The adidas group net income for 2015 was impacted by non-operational goodwill impairment losses totalling €34 million ($38.5M), mainly related to the company’s Russia/CIS and Latin America cash-generating units. The impairment losses were non-cash in nature and do not affect the adidas Group’s liquidity" (FT, 2/11).

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