Adidas AG is a German industrial concern specializing in the production and sale of sports shoes, clothing and equipment under the trademarks adidas and Reebok.
The company’s report for the first quarter of 2019 exceeded market expectations. The company management has confirmed the forecast for 2019 and has begun to solve business problems. Stocks are at historic highs and are not even going to go down. Consider the main factors of growth rate at the moment and its future prospects.
Recently, the company published a financial report for the first quarter of this year. Adidas results exceeded market expectations, mainly due to the increase in online sales and expansion in China. The company’s revenue for the three months of 2019 was 5,883 billion euros, and thanks to the growth in online sales, profitability increased by 1.4 percentage points to 14.9%.
Operating profit surpassed analysts’ forecasts, reaching 875 million euros. The company’s management has announced plans for the current year, in which among the main points there is an increase in revenue of 5–8% and achieving net profit in the range of 1,880–1,950 billion euros.
General situation in the company
At the moment, Adidas solves the problem with supplies to the United States and plans to resume sales growth in Europe by the end of the year. With regard to delivery, the company will have to increase the cost of supplying goods to the US through air transportation. In turn, in Europe, the company seeks to reduce its dependence on Adidas Originals and increase sales of sports equipment through the release of new products. In addition, an important factor is the European Football Championship 2020, which can provide revenue growth in the Old World starting from the fourth quarter.
Another important point is the Adidas partnership agreements. Last year, thanks to such stars as Barcelona striker Lionel Messi and rapper Kanye West, the company increased sales in China by 16%. In May of this year, the company extended the sponsorship of the Real Madrid club until 2028. In April, Adidas announced the signing of an advertising contract with the singer Beyonce and the development of a new line of shoes and clothing.
Since the end of December, Adidas shares have moved in the uplink. After the publication of quarterly reports, their quotes rose by 12% in four trading sessions and updated the historical maximum.
Most analysts raised their target price against the background of the company’s first-quarter results. The average target price for a stock is 280 euros. The growth potential to this level is 12.4% with a dividend yield of 1.34%.