German sportswear giants Adidas AG had its shares soaring, as a confluence of continued growth in Asia combined with online sales to see it maintain its five-year profitability.
The company reaped big from a double-digit growth index in China within the first three months of 2019, pushing overall sales in the Asia-Pacific region to over one-third of global proportion. Revenue from the company’s e-commerce initiatives gained upwards of 40 percent in the same quarter.
The double gains were crucial to Adidas CEO Kasper Rorsted’s efforts to improve margins and helped him maintain the company’s 2020 targets. This happened despite the fact that demand dwindled at home while problems to do with the supply-chain hindered prospects in North America.
Sales growth in China grew by 16 percent while figures out of Europe showed that revenue slipped 3 percent. North America saw the company record a lowly 3 percent growth.
On Friday morning, the Adidas stock climbed nearly 7.5 percent in Frankfurt, a record that pushed the company’s market valuation to €49 billion (approximately $55 billion).
With the problems of shrinking home sales and supply-chain challenges in North America, analysts had forecast a downturn in Adidas’s fortunes. However, the recent successes in earnings results coupled with efforts to fix the aforementioned challenges, the company could return to the days of rapid growth witnessed in the last five years.
Ostensibly, investors have looked to up their efforts in trying to short the stock, with the added attention of short sellers being attributed to the stock’s recent volatility. IHS Market data states that the last few weeks have seen investors lodge bets against a little more than 2 percent of Adidas’ shares.
While not overly significant in terms of being a huge position, the amounts involved are double what punters used towards the end of March.
Adidas reported that its global sales hit €5.88 billion, against an average estimate of €5.8 billion. Notably, the company’s operating profit of €875 million comfortably beats expected estimates.
Rorsted told Bloomberg that the company targets additional capacity in its mid-priced item categories and hopes 2020 will not be as constraining as it has been so far in 2019.