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New chief executive expects sales, profit to climb faster than under his predecessor

By Sara Germano and Natascha Divac 

Adidas AG's new chief executive promised to increase sales and boost profits faster than his predecessor, saying the German athletic-gear giant could overcome challenges elsewhere in the sporting-goods industry.

Kasper Rorsted, who took over in October, said in an interview Wednesday that the improved profitability would come from selling more full-priced products and improvements to the supply chain, as well as foreign-exchange benefits.

Mr. Rorsted said Adidas is working to bring products to market in-season in order to mitigate inventory losses, and pointed to the development of new factories at production partner BASF SE, which makes the Boost material used in some of Adidas' most popular sneakers.

"Boost is one where we left a lot of money on the table," he said of recent results, adding that sneakers that contain the white, spongy-looking material like the NMD, the Ultra Boost, and others have been consistently sold out because of an inability to keep up with demand. Adidas has already established a new factory in Germany and is planning to open another in Atlanta this year to help speed its own product production.

The company on Wednesday raised its sales forecast to increase at a currency-neutral rate between 10% and 12% a year on average through 2020. Previously, it targeted an increase at a high-single-digit rate. Net income from continuing operations is projected to rise between 20% and 22% a year on average in the period, up from a previous forecast of around 15%.

Adidas is in the midst of an overhaul focused on shedding underperforming operations and beefing up results in the important U.S. market, where it competes with Nike Inc. and Under Armour Inc. The American sporting-goods industry has seen a broad contraction over the last year, with bankruptcies and liquidations at several retailers as manufacturers have worked to drive more direct sales.

Dick's Sporting Goods Inc., one of the largest U.S.-based chains, said Tuesday it would shed a fifth of brands it carries as it expands distribution of major vendors' products, including those of Adidas.

The sports apparel and footwear industry has grappled with a shift in consumer taste away from performance wear toward casual, fashion-forward looks. Such changes are evident at Adidas, where sales of lifestyle-oriented products rose 45% for the year, while performance products rose 13%.

Mr. Rorsted cautioned that the performance business accounts for about 70% of Adidas brand sales, and that the division between performance and fashion products is blurring.

Adidas's net loss in the three months ended December narrowed to EUR10 million (about $10.5 million) from a EUR44 million loss a year earlier. Sales increased to EUR4.69 billion from EUR4.17 billion, boosted by growth in its running category.

Adidas said it would continue to sharpen its focus on the Adidas and Reebok brands and whittle away at noncore operations. The company is now seeking a buyer for its ice-hockey brand CCM Hockey, and said the sales process for the golf brands TaylorMade, Adams Golf and Ashworth, is on track.

Write to Sara Germano at sara.germano@wsj.com and Natascha Divac at natascha.divac@wsj.com

(END) Dow Jones Newswires

March 09, 2017 02:47 ET (07:47 GMT)

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