Adidas Lunges Forward With Huge Buyback Proposition

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Adidas reported its most recent quarterly results before the markets opened on Wednesday. Overall, the company delivered solid results that culminated a year of impressive sales. However, one of the big takeaways from this report was shareholder return, which seems to be driving the stock even higher.

During the fourth quarter, Adidas revenues increased 19% on a currency-neutral basis, driven by a 22% increase at brand Adidas. This development reflects strong double-digit sales growth in the running, football and outdoor categories, as well as at Adidas Originals and Adidas neo.

Additionally, a mid-single-digit sales increase in the training category also contributed to this development. Revenues at the Reebok brand declined 1%, as double-digit increases in the running category as well as in Classics were more than offset by declines in the training category.

Looking ahead, Adidas expects sales to increase at a rate of around 10% on a currency-neutral basis in 2018. Currency-neutral revenues are projected to grow at double-digit rates in North America and Asia/Pacific, while currency-neutral sales in Western Europe and Latin America are forecast to improve at a mid-single-digit rate each. Currency-neutral revenues in Emerging Markets are expected to grow at a low-single-digit rate. Currency-neutral sales in Russia/CIS are projected to be flat.

As for the shareholder return, the company detailed in its release:

As a result of the strong operational and financial performance in 2017, the company’s strong financial position as well as Management’s confidence in adidas’ short- and long-term growth aspirations, the Executive and Supervisory Boards will recommend paying a dividend of € 2.60 per dividend-entitled share to shareholders at the Annual General Meeting on May 9, 2018. This represents an increase of 30% compared to the prior year dividend (2016: € 2.00) and a payout ratio of 37.1% (2016: 37.4%) of net income from continuing operations excluding the negative one-time tax impact in 2017. This is within the target range of between 30% and 50% of net income from continuing operations as defined in the company’s dividend policy. In addition, adidas decided to launch a multi-year share buyback program of up to € 3.0 billion in total until May 11, 2021. Starting on March 22, the company plans to buy back shares worth up to € 1.0 billion in 2018. Both the company’s dividend policy as well as the share buyback program reflect adidas’ commitment to sustainably creating long-term value for its shareholders.

Over-the-counter shares of Adidas were last seen up about 9% at $116.46, with a consensus analyst price target of $138.87 and a 52-week range of $92.97 to $118.98.