Adidas and Puma were born of a schism in the Dassler family, when feuding brothers Adi and Rudolf founded rival sportswear brands in post-war Germany. Along with U.S. behemoth Nike , Puma is now valued at a premium to Adidas, despite a sharp rise in its German rival’s shares over the past three years. The catchup race has further to run.

Adidas shareholders have benefited most from the global vogue for high-priced sportswear: the shares are up 160 percent since March 2015, beating Puma’s 110 percent rise and Nike’s 40 percent. Deals with supposed trendsetters such as rapper Kanye West and reality-TV celebrity Kendall Jenner have boosted growth in the United States, where Adidas is taking share from market leader Nike. Figures released on Wednesday show worldwide revenue up 19 percent in the most recent financial quarter, after adjusting for currency movements. That’s comfortably outpacing Nike, whose latest quarterly sales were up just 3 percent, and Puma, which gained 15 percent.

Adidas’ margins, which have long trailed leaner Nike, are also expanding. The 38 billion euro group converted 9.8 percent of sales into operating profit last year, up from 8.6 percent the year before. That’s closer to the 12.8 percent that analysts have pencilled in for Nike’s current financial year which ends in May. Adidas boss Kasper Rorsted reckons he can get Adidas up to an 11.5 percent operating margin in 2020 by keeping sales growing at a double-digit rate, flogging higher-priced items and cutting costs.

If he succeeds, the Stan Smith maker should earn a higher valuation. Even after a 9 percent jump on Wednesday morning, Adidas shares are worth just over 23 times its expected earnings for 2018; Nike and Puma on average trade on a 29 times multiple. If that valuation discount halves, Adidas shares would be worth 206 euros compared with 185 euros on Wednesday. Rorsted’s efforts at least give Adidas a sporting chance of closing the gap.

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- Adidas on March 14 said its 2017 revenue was 21.2 billion euros, up 16 percent excluding the effects of currency movements. Analysts polled by Reuters on average expected the German sportswear brand to report sales of 21.3 billion euros.

- Operating profit was 2.1 billion euros, implying an operating margin of 9.8 percent – better than analysts’ forecasts of a 9.4 percent margin.

- The group run by Kasper Rorsted proposed a dividend of 2.6 euros per share, 30 percent higher than the 2016 payout. On March 13, Adidas launched a 3 billion euro share buyback programme running until May 2021, with 1 billion euros of buybacks planned this year.

- The company expects sales growth of around 10 percent this year, after stripping out currency movements, and an operating margin of between 10.3 and 10.5 percent.

- Adidas said its operating margin should rise as high as 11.5 percent by 2020, while the company raised its long-term forecast of annual earnings growth from continuing operations to 22 to 24 percent, from 20 to 22 percent previously.

- Adidas shares were up 8.8 percent to 183.85 euros at 0905 GMT.

- For previous columns by the author, Reuters customers can click on


(Editing by Peter Thal Larsen and Bob Cervi)

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