Adidas’ buyback, profit forecast set to boost shares

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German sportswear firm, Adidas, looks set to get a boost from news of a large buyback in spite of forecast of slower sales and profit growth for 2018.

The news has made Adidas lift its 2020 profitability forecast and shares following sluggish sales and profit records in 2017 and the start of 2018.

Adidas said it plans to buy back up to 3 billion euros (2.66 billion pounds) worth of its shares by 2021, or almost 9 per cent of its share capital.

The sportswear giant has seen its shares fall 15 per cent in the past six months as its growth cooled.

The German company’s shares were indicated up 4 per cent in pre-market trade.

Adidas proposed a dividend of 2.60 euros per share, above average analyst forecasts for 2.53 euros.

Adidas forecast currency-neutral sales will rise around 10 per cent in 2018, with an operating margin of between 10.3 and 10.5 per cent.

This is an improvement on the 9.8 per cent posed in 2017. Its estimated net profit from continuing operations will increase by between 13 and 17 per cent.

It also lifted its 2020 profitability target, aiming for net income from continuing operations to grow by an average of 22 to 24 per cent per year, from a previous 20 to 22 per cent.

The company’s operating margin is expected to hit 11.5 per cent by 2020, up from a previous target for 11 per cent.

Since taking over in 2016, Chief Executive Kasper Rorsted has put a bigger focus on improving profitability, which still lags bigger rival Nike.

The U.S. firm trades at a premium to Adidas even though it is growing more slowly.

Adidas said fourth-quarter sales rose 12 per cent to 5.06 billion euros, a currency-neutral rise of 19 per cent.

However, it failed to meet analyst forecasts of 5.13 billion as sales in Russia and at its Reebok brand slipped.

Fourth-quarter operating profit more than tripled to 132 million euros, beating analyst forecasts for 61 million.

But the company recorded a net loss of 41 million euros after a tax impact of 76 million due to changes in the U.S. tax code.