German athletics apparel and footwear company Adidas (ADDYY) saw its shares skyrocket to a record high on Wednesday, closing at a price of $91.72. The firm’s new CEO, Kasper Rorsted, lifted sales and profit targets, pledging to continue its aggressive expansion into the key U.S. market and heighten its focus on ecommerce.
Analysts remain bullish on the long-term growth prospects for the Herzogenaurach-based company, as investors lift Adidas’ shares 136% year over year (YOY).
'Creating the New'
Rorsted, who took over at Adidas in October after serving as CEO at German consumer goods giant Henkel AG, promised to accelerate the execution of an existing 2015-2020 strategic plan called “Creating the New.” The initiative is intended to propel the athletics apparel company to secure sales growth between 10% and 12% over the five-year period. Adidas’ net income is expected to increase between 20% to 22% on average until 2020.
A key component of the accelerated initiative is for Adidas to maintain its momentum as the fastest growing brand in the United States. The European firm’s bullish outlook puts the heat on U.S.-based rivals such as Nike Inc. (NKE) and Under Armour Inc. (UAA), as the former has seen its market share remain relatively flat and the later has struggled with a major slump. (See also: Can Under Armour Make a Comeback?)
Top-Selling Yet Underrepresented
While Adidas’ Superstar sneaker outran Nike for top-selling shoe of 2016, the German company indicates that it’s just the beginning for its U.S. competitors, stating that its brand “remains under-represented in the world’s largest sporting goods market.”
As part of the a “digitalization offensive,” Rorsted doubled Adidas’ ecommerce growth target to $4 billion by 2020.
Also included in the revamped five-year strategic plan is a commitment to shaping a stronger, unique company culture, driven by the “core belief that, through sport, all Adidas employees have the power to change lives.”
Full-Year 2016: Record Sales and Earnings
In the most recent fourth quarter, Adidas posted earnings in line with expectations, as sales grew 12.5% over the same period last year. In the full year 2016, Adidas posted record sales and earnings, with revenues of 19.3 billion euros ($20.3 billion) reflecting an 18% increase YOY on a currency-neutral basis. Net income from continuing operations rose 41% to 1.109 billion euros ($1.17 billion), breaking the 1-billion-euro mark for the first time in company history.