German sportswear firm Adidas relished the success after the company reported continued strong sales and profits growth in the third quarter on Thursday (Nov. 9). North America and China have been important markets for Adidas, where the company's third-quarter results revealed 31 percent sales growth in the United States and 29 percent sales growth in Greater China.
Adidas' revenue has soared, thanks to the expansion of its Originals line (retro sneakers like the Superstar and Stan Smith) that reported 12 percent revenue growth through brick-and-mortar stores, and eCommerce that reported 39 percent.
"The company's strategic growth areas -- North America, Greater China, and eCommerce -- were again the main drivers of our strong top-line performance during the third quarter," Adidas CEO Kasper Rorsted said. "We are even more pleased with the quality of our growth, which is clearly reflected in the exceptional profitability improvement in Q3."
Adidas anticipates that sales will reach at a rate of between 17 percent and 19 percent on a currency neutral basis, while the net profit is expected to increase at a rate of between 26 percent and 28 percent through the year.
Adidas see slow growth in Europe
Adidas' sales have increased 9 percent to 5.677 billion euros ($6.59 billion). Despite strong growth in America, sales in Europe are slow, according to Rorseted who told reporters.
Adidas ceased sponsorship contracts with the National Basketball Association (NBA) and Premier League champions Chelsea, which led to a decline in basketball and soccer sales.
Additionally, sales in Russia decreased by 17 percent. The brand blamed the country for declining sales due to the ongoing challenging consumer sentiment and store closures.
Rorsted didn't anticipate that the weakness of the Russian economy would diminish sales of merchandise.
Nike and Under Armour struggle in the face of competition in Q3
Nike and Under Armour, the two biggest competitors in the sportswear business, continue to face the struggle amid the competition. Under Armour reported weaker-than-expected third-quarter revenue and lowered the full-year 2017 expectations.
When companies reported Q3 earnings, Under Armour posted a decrease in sales of 12 percent, while Nike posted a decrease in sales of three percent.
For the quarter in North America, Adidas earned $1.3 billion (including sales from Reebok), while Nike earned $3.9 billion in sales. While Adidas dominate the international apparel and footwear market, Mark King, the president of Adidas North America, acknowledged that the company has a long way to go to reach "sportswear dominance" in the U.S.
The report in September, however, came as a surprise that Adidas surpassed Nike's Jordan Brand to become the second top sneaker brand in the U.S. by market share. Christopher Svezia, an analyst for Wedbush, a private financial service firm, told CNNMoney recently that customers are starting to want to wear Adidas with more casual style and retro looks.
Adidas develops strategic plans to become the top sports brand in the U.S. This year, the company opened a "speedy factory" in Atlanta, where they manufacture products and distribute running shoes. King reported plans to open a new world-class office in downtown Los Angeles as a part of business strategy to target global cities such as New York, London, Paris, Shanghai, and Tokyo.
Has bribery scandal affected Adidas' relationship with colleges and universities?
Despite Adidas' good financial story, there is a dark side of the firm association amid a bribery scandal involving James Gatto, a sports marketing executive who was responsible for overseeing its basketball division at Adidas. Two months ago, the FBI arrested 10 people, including college basketball assistant coaches, sports agents, and others for their roles in a corruption scheme.
When asked whether bribery scandal would affect Adidas' relationship with colleges and universities for sponsorship, King said in a response to Yahoo Finance, "I don't think it's affected things at this point." He also said that the company is cooperating with the law enforcement authorities and wants to discover where their processes broke down and fix those right away.
Adidas has sponsorship deals with athletic colleges and universities, including University of Louisville, UCLA, Texas A&M, Kansas and Arizona State University.
