In 2016, Adidas hit a major milestone: Net profits surpassed €1 billion, and growth has not slowed since then. The German activewear company, which owns both Adidas and Reebok, announced Wednesday that, in fiscal 2017, profits from continuing operations grew 32 percent to €1.43 billion, while revenue grew 16 percent to €21.218 billion.
Adidas and Reebok sales are accelerating especially quickly in China, North America and online, where sales grew 29 percent, 27 percent and 57 percent, respectively. Given that China and North America are the world's largest markets, that's significant, and the news even led the Wall Street Journal to advise Nike stockholders to "switch teams" to Adidas, its biggest competitor. (While Nike is still bigger than Adidas, Adidas is growing more rapidly in these markets.)
At Adidas specifically, sales were up 18 percent and growth was driven by double-digit sales increases in the running category as well as at adidas Originals and adidas neo. At Reebok, sales were up only 4 percent driven by a double-digit spike in sales of its "Classics" styles. (Millennial-friendly faces including Gigi Hadid, Lil Yachty, Teyana Taylor, Rae Sremmurd and more have signed on with Reebok in recent months.)
In the full financial report, Adidas reiterated its mission to become the "best sports brand in the world," in part by continuing to implement its "Creating the New" strategy, which began in 2015, through the year 2020: The strategy is focused on speeding up production, winning over shoppers in metropolitan cities and "open source," which encompasses collaborations with consumers, designers and celebrities alike. The company name checked its collabs with Alexander Wang, Kanye West and Stella McCartney as being effective in increasing desirability of the brand. However, it also said that in an effort to curb marketing spend, it will limit the number of these types of partnerships going forward.
Adidas expects sales to increase around 10 percent in 2018, and has upgraded its profitability target for 2020: It now projects profits will increase by an average of 22 percent to 24 percent per year.
Nike better watch out.