German sportswear firm Adidas reported stronger-than-anticipated second-quarter net profit on Thursday, with the company saying it remains firmly on track to hit its full-year targets despite taking an impairment charge on its struggling Reebok brand.
Net profit over the second quarter rose 20 percent to 418 million euros ($485 million), beating analyst expectations of 387 million euros.
Kasper Rorsted, who took over as CEO in 2016 after a series of profit warnings, has sought to place a greater emphasis on profitability at Adidas — although the company still lags behind U.S.-based rival Nike.
Here are the key second-quarter metrics:
- Net profit: 418 million euros ($485 million) vs. 387 million euros expected, according to Thomson Reuters.
- Sales: 5.3 billion euros vs. expected 5.2 billion euros, according to Thomson Reuters.
Sales came in at 5.3 billion euros, a rise of 10 percent after currency effects, and ahead of average analyst estimates for a rise of 8 percent.
Nonetheless, the company announced it was taking a medium triple-digit million euro impairment regarding its Reebok brand after the German Financial Reporting Enforcement Panel disagreed with how the firm calculated historical book value.
Adidas said this retrospective accounting move would have no impact on its full-year 2018 results.
“We are very confident we are going to get Reebok into black territory by 2020, that’s been the primary target and it also means in certain regions we are willing to take a slower revenue growth or even a declining one. However … We are very confident we are doing the right thing for Reebok,” Rorsted told CNBC’s “Squawk Box Europe” on Thursday.
When asked whether he was concerned about an escalating trade war between the U.S. and China, Rorsted said the set up of Adidas’ supply chain structure should mean the company’s exposure to any turmoil would be “minuscule.”
“I think the bigger risk is that if the U.S. consumer’s disposable income gets hit, that is the much bigger issue,” he added.
Adidas shares, already up more than 14 percent so far this year, surged more than 7 percent on Thursday.
Marketing spend increased to 13.5 percent of sales from 12.3 percent, largely due to the soccer World Cup. Rorsted told CNBC his company sold more than 8 million jerseys during this summer’s soccer tournament — though with Nike-sponsored nations dominating the final stages of the World Cup, Adidas missed out on an extra profit boost.
Sales growth in North America slowed slightly to 16 percent during the second quarter, but accelerated to 27 percent in China. As Adidas had previously warned, sales remained relatively flat in Europe during the same period.
The sportswear company has been taking a greater portion of market share away from some of its peers in the U.S. over recent quarters — a very competitive market as athletic apparel and shoe retailers try to reach shoppers following a number of bankruptcies by sporting-goods businesses.
Late last month, athletic wear company Under Armour reported stronger-than-anticipated second-quarter revenue, as the company saw international sales surge. Nike is not scheduled to release its latest earnings figures until late September.