Sales development (currency-neutral)
|to increase at a rate between 11% and 13%|
|Gross margin||to increase up to 0.5 percentage points to a level of up to 49.1%|
|Other operating expenses in % of sales||below prior year level|
|Operating profit||to increase at a rate between 18% to 20%|
|Operating margin||to increase between 0.6 and 0.8 percentage points to a level between 8.3% and 8.5%|
|Net income from continuing operations||to increase at a rate between 18% and 20% to a level between € 1.200 billion and € 1.225 billion|
|Basic earnings per share from continuing operations||to increase at a rate between 18% and 20%|
1) The company outlook for the 2017 financial year as outlined in the 2016 Annual Report remains unchanged.
- World Bank, Global Economic Prospects
- IMF, World Economic Outlook.
Global GDP is projected to increase by 3.5% in 2017. This development will be supported by a further stabilisation in commodity prices, improvements in global trade and manufacturing activity as well as continuous accommodative fiscal and monetary policies. Nevertheless, heightened policy uncertainty and weak productivity growth are expected to weigh on the economic recovery. Developing economies are forecasted to remain a major contributor to the global economic expansion in 2017. At 4.5%, their growth rate is projected to accelerate strongly compared to 2016. In developed economies, GDP is expected to grow at a level of 2.0% in 2017.
Source: NPD Market Research.
In the absence of any major economic shocks, we expect the global sporting goods industry to grow at a mid-single-digit rate in 2017. Consumer spending on sporting goods in the developing economies is expected to grow faster than in the more developed markets. Strong wage growth and domestic consumption in many developing economies are predicted to propel the industry throughout the year. In developed economies, the sporting goods industry is forecasted to benefit from wage increases which will support consumer spending on sporting goods and fuel the industry’s growth. In addition, rising sports participation and health awareness globally is projected to continue to boost sportswear demand.
Against the background of the strong financial performance in the first quarter of 2017, management has confirmed the company outlook for the full year as outlined in the 2016 Annual Report.
We expect sales to increase at a rate between 11% and 13% on a currency-neutral basis in 2017. The gross margin is expected to increase up to 0.5 percentage points to a level of up to 49.1%. Gross margin will benefit from positive mix effects as well as higher product margins at TaylorMade-adidas Golf compared to the prior year. However, less favourable US dollar hedging rates will negatively impact the gross margin development, particularly in the first half of 2017. Other operating expenses as a percentage of sales are expected to be below the prior year level of 42.8%, driven by leverage from both expenditure for point-of-sale and marketing investments as well as operating overheads as a percentage of sales. This, together with the strong top-line growth and the projected gross margin improvement, is expected to drive an increase in operating profit of between 18% and 20% in 2017. Consequently, we expect the operating margin to increase between 0.6 and 0.8 percentage points to a level between 8.3% and 8.5%. Net income from continuing operations is projected to increase at a rate between 18% and 20% to a level between € 1.200 billion and € 1.225 billion. Basic earnings per share from continuing operations are also expected to increase at a rate between 18% and 20%.
Taking into account the occurrence likelihood and the potential financial impact of the risks explained in the 2016 Annual Report, as well as the current business outlook, Management does not foresee any material jeopardy to the viability of the company as a going concern. Management remains confident that the earnings strength forms a solid basis for our future business development and provides the necessary resource to pursue the opportunities available to the company. Compared to the assessment in the 2016 Annual Report, overall the company’s risk profile remains unchanged.
2) This Outlook contains forward-looking statements that reflect Management’s current view with respect to the future development of adidas. The outlook is based on estimates that we have made on the basis of all the information available to us at this point in time. In addition, such forward-looking statements are subject to uncertainties as described in the Risk and Opportunity Report of the adidas 2016 Annual Report (pp. 118 –132), which are beyond the control of the company. In case the underlying assumptions turn out to be incorrect or described risks or opportunities materialise, actual results and developments may materially deviate (negatively or positively) from those expressed by such statements. adidas does not assume any obligation to update any forward-looking statements made in this Outlook beyond statutory disclosure obligations.