Adidas Surges After China Sales Drove 1Q Consensus Beat -- Earnings Review

By Joshua Kirby

Adidas AG posted first-quarter sales above consensus Friday, triggering a rise in its share price. At 0835 GMT, shares in the German sporting-goods company traded 8% higher at EUR279.50. Here's what we watched:

SALES: Quarterly sales came in at 5.27 billion euros ($6.36 billion), up 27% at constant currency from EUR4.38 billion in the first quarter of 2020. Analysts had expected sales of EUR5 billion, according to FactSet.

OPERATING PROFIT: Earnings before interest and taxes stood at EUR704 million, up more than tenfold compared with the same period the previous year, and well ahead of FactSet-compiled consensus expectations of EUR575 million.

WHAT WE WATCHED:

-CHINA POSITIVES: Sales in greater China rocketed in the quarter, increasing by 156% to EUR1.40 billion, though with an easy comparison base against 2020's pandemic-hit first quarter.

-CHINA NEGATIVES: Adidas didn't allude to any potential negative effect from a consumer boycott in China relating to its stance on cotton produced in the Xinjiang region. However, an upgrade to organic-growth guidance suggests management is not expecting any material drag from the issue, analysts at Jefferies say. The issue is likely to be raised at a conference call later Friday.

-MARGIN CALL: Adidas's gross margin increased by 2.1 percentage points to 51.8%, close to 2019's full-year figure. The margin was boosted by lower sourcing costs and favorable channel and market mix, the company said.

Write to Joshua Kirby at [e-mail]; @joshualeokirby

(END) Dow Jones Newswires

May 07, 2021 04:54 ET (08:54 GMT)

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