How Adidas Is Conquering the US Market With the Ultra Boost

Another quarter brings another earnings win for Adidas AG, which continues to build on an enviable U.S. resurgence that started around late 2015.

The Germany-based athletic firm — and owner of Adidas and Reebok — today posted second-quarter results that surpassed forecasts, with overall sales up 4 percent to 5.3 billion euros, or $6.1 billion at current exchange. Those numbers — driven by a combined sales gain of 16 percent for Adidas and Reebok in North America — were just above analysts’ bets for sales of 5.2 billion euros.

Separately, Reebok’s total sales were down 3 percent, while those of Adidas enjoyed growth of 12 percent during the period — bolstered by double-digit growth in training, running and football. (For Reebok, sales of its Classics were more than offset by declines in its training and running categories.)

While the Superstar and Stan Smith franchises played a huge role in Adidas’ initial U.S. revival two years ago, on a call with analysts today, CEO Kasper Rorsted called out the brand’s Ultra Boost franchise for having a “significant impact” on its sales growth. (Adidas has enjoyed double-digit gains in North America for the past two years.)

“We’ve built one of the most converted franchises in our industry in the Ultra Boost,” Rorsted told investors. “This continues with this franchise growing close to 50 percent in the past quarter. So we are a long way from being saturated.”

Adidas’ chief further predicted that the early 2019 launch of the next generation of the Ultra Boost will mark the next leg of growth and propel it to the 1-billion-euro mark.

Overall, the company’s Q2 profits were up 20 percent to 418 million euros, or $484 million, significantly besting forecasts calling for profits of 387 million euros.

By market, the combined sales of the Adidas and Reebok brands were up 19 percent in Asia Pacific, driven by a 27 percent increase in Greater China. Revenues in Latin America were up 15 percent and Russia saw gains of 14 percent, helped by this year’s FIFA World Cup. (Adidas said it sold more than 8 million jerseys during the global sporting event.)

Sales in Western Europe, where the company has been experiencing softness, were flat year over year. Rorsted said the firm expected some normalization to take place in that market, although “the normalization year-to-date has been somewhat more pronounced.” He noted that the company has “acted and made changes” in its Western European management team in order to “ensure that the execution [around product selling and consumer activation] is being stepped up.”

Adidas confirmed its full-year outlook and continues to expect sales to increase at a rate of around 10 percent on a currency-neutral basis, driven by double-digit growth in North America and Asia-Pacific. Net income from continuing operations is projected to increase to a level between 1.615 billion euros and 1.675 billion euros, an increase of between 13 percent and 17 percent over the prior year. EPS from continuing operations is expected to increase at a rate between 12 percent and 16 percent compared with the prior year.

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