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Adidas (ADDYY) Stock Jumps 9% on Strong Earnings and Upbeat Guidance

Joseph Lu

On Wednesday, Adidas ADDYY stock is up almost 9% to $91.90 per share in afternoon trading. The German sportswear giant soared after posting strong earnings and upbeat guidance for 2017.

Adidas posted an 18% currency-neutral increase in sales for the full year of 2016. The company expects sales to increase at a rate between 11% and 13% on a currency-neutral basis for 2017.

“2016 was an exceptional year for Adidas. We have improved the desirability of our brands and products around the globe,” said Kasper Rorsted, CEO. “As a consequence, we were able to increase revenues strongly and achieve a record net income of more than €1 billion for the first time in the history of our company.”

The world is certainly attracted to Adidas. The sportswear maker saw double-digit revenue growth in all market segments besides its Russia/CIS region, where revenues only grew 3%. However, the rest of the world saw sales growth between 16% and 28%.  The North America market increased 24% year-over-year while the Greater China region increased 28%.

Rorsted credited the solid performance to choosing the right athletes for the appropriate market and also engaging the youth through digital devices.

Rorsted, who took over as chief executive in October last year, made it his priority to boost performance in the U.S. market and improve Reebok’s perfromance, which is the exclusive licensee of Crossfit. For Adidas, the biggest competitors are Nike NKE and Under Armour Inc. UAA.

Nike is trading flat at $56.52, and Under Armour is down 2.15% fall to $19.27.

“This is a global battle for the sports market and we are very well positioned. We deliver €1 billion in profit and our plan is to deliver 2 billion profits in 2020, so it’s a battle all over the place. And is not only a battle against our key competitor in U.S., which is Nike (NKE).” said Rorsted in an interview with Bloomberg.

In order to reach Adidas’ 2020 profit expectations, Reebok’s performance will be a key component in reaching that goal. The brand’s 2016 annual sales were only up 6% compared to last year.

“It’s about creating the right products for the right sports athlete in the right places. We are quite comfortable and confident that we can get to where we want to get but its not one battle against one competitor, I think that would be making the market a bit simpler than it is,” Rorsted added.

Net loss in the three months ended December was €10 million, which was a 77.7% increase of what was recorded a year-ago in the same period at a net loss of €44 million. Despite posting a net loss, as a result of the strong 2016 operational performance, Adidas proposed a dividend of €2 per share to all dividend-entitled share holders.

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