German sportswear giant Adidas reported its 2016 full-year earnings on Tuesday, and its revenue of 19.3 billion euros was slightly below analyst expectations. And yet, Adidas shares are up 9% since the earnings report.
That’s because what matters most to investors is the future, and Adidas significantly raised its guidance for 2017 and beyond.
Adidas gives great guidance for 2017 and beyond
For 2017, Adidas is projecting revenue growth between 11% and 13%, and net income growth of up to 20%. Looking ahead to 2020, Adidas expects revenue growth to run at a rate between 10% and 12% and net income to rise 20% to 22%.
That’s an extremely sunny outlook, after an “exceptionally successful” (in the company’s own words) 2016. And the company’s full-year revenue, while slightly lower than expectations due to a loss in the fourth quarter (caused by more investment in struggling Reebok), was 18% higher than its 2015 revenue. It represents, in fact, a record year for Adidas.
Adidas sneakers are red hot right now
The driver of success for Adidas last year? Sneakers. Adidas’s overall sneaker sales jumped an eye-popping 80% in 2016, according to retail tracker NPD Group. It was a substantially larger spike than any major competitor saw.
And the stocks reflect it: in 2017 so far, Adidas is up 17%, while Nike is up 11% and Under Armour is down 29%. If you look at the past 12 months, the discrepancy is even more stark: Adidas is up 67%, while Nike is down 3% and Under Armour is down 57%. Wall Street blog The Street writes that Adidas should “terrify the heck out of” Nike and Under Armour right now.
In the cutthroat US athletic footwear market, Adidas rose to nearly 8% market share, gaining on Nike’s 40.8% and distancing itself from Under Armour’s 2.8%. The company’s stunning success in the sneaker market is a turnaround after an ugly few years for the ‘three stripes’ in America, and it’s the reason Yahoo Finance named Adidas our sports business of the year.
All told, it was a triumphant end-of-year earnings report, CEO Kasper Rorsted’s first as the company’s new chief. Now Adidas will look to deliver on its heightened promises for 2017.
Daniel Roberts is a writer at Yahoo Finance, covering sports business and technology. Follow him on Twitter at @readDanwrite.
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