Thanks very much, Brian. Good afternoon, ladies and gentlemen. Welcome to our full year 2018 conference call. Our presenters today will be our CEO, Kasper Rorsted, and Harm Ohlmeyer, our CFO. Before I will hand over to Kasper and Harm in just a minute, the regular housekeeping items up front. During the Q&A sessions, please limit your questions to two in order to give as many people as possible the chance to ask a question. Secondly, unless otherwise stated, all top-line growth rates are currency neutral. With that, I would like to hand over to Kasper.
Thank you very much, Sebastian. 2018 was a year where we celebrated sport, whether it's the World Cup taking place in Russia, where we used the global stage to showcase the power of our brand. Our content on social media was more visible and with greater impact than any of our competitors. Global future sales and on-site sales exceeded 2014 levels. We had a commercial success despite the somewhat unexpected development of the tournament. Real Madrid won for the third time in a row, the Champions League, and for the 13th time overall. Alexander Zverev first beat Federer and then Djokovic to win the ATP Finals in London. Laura Dahlmeier took two gold medals in the Olympics in Korea, and James Harden became MVP after scoring more than 30 points per game. Overall, a year where sport was celebrated.
It's also this year a year where we're celebrating adidas. 70 years birthday of adidas, founded in 1949, and since then, worked on becoming the best sports brand in the world. Really staying true to our roots by staying here in Herzog, where we're taking the call from today, where we've done major investment to build a fantastic sports campus to attract the best employees in the world and to create the best products in the world. We've also made substantial investments in our Portland facility, which we're doubling, which would be done by 2021. We moved into a complete new setup in Shanghai, China, to accommodate for large but successful Chinese organization. adidas is moving forward. Let me now give you a strategic update on where the company is.
You all know our strategy, which is aimed at developing brand desire with the desired outcome of driving top line and market share growth, gross margin expansion, and operating leverage. Before we come to the numbers, I and subsequent Harm will speak about how culture, Open Source cities, speed, and of course, focus, our strategic priorities have moved forward in order for us really to make certain that we are delivering the numbers of our company. The foundation for our company is our culture. For the first time, we've now put a global performance management system in place that captures approximately 30,000 people in a consistent way, the remaining 30,000, I'm including retail.
Capture 30,000 employees globally on a quarterly sequence whereby we, on a web-based tool, have an effective management and also review process of how each individual performs and how coaching takes place from the managers in our systems. We have also, as you know, established our leadership groups, whether it's the board, the core leadership with the top 22 or the extended leadership with more than 120 people. These 150 people are those that essentially manage the company. We also continue to do a very strong performance evaluation of this group. In the last couple of years, of our top 22, approximately eight has been changed, and in our ELG group with 120, approximately 50 has been changed.
The vast majority of the new members are coming internally, and we believe that is the right thing for our culture, that we develop our leaders internally. Of course, we benchmark them against external to ensure that we have the right capability. We are a performance-driven organization. Which brings me to our LTI system, which is completely aligned with the shareholder interest. Two years ago, we implemented for our top 600 leaders, and now we've implemented also for the board with the expiration of the open CI system, which means that we measure the same as we're guiding EUR 210 million incremental net income per year that converts into stock and vest after a four-year period. A system that has proven to be very useful internally to drive the focus of our top 600 leaders in our company.
Last but not least, we continue to value and promote diversity. Today, we have more than 33% of our leaders being female, with the original target of having 32% by 2020. We are driving our workforce to become more diversified, also much more global in nature than it's been before. As you've seen, a couple of weeks ago, we made the decision to nominate Martin Shankland to run our global ops organization in place with Joe Ebers. Martin has been at adidas for most of his life. He is a Australian citizen. Did his first stint within KPMG, ran our Russian organization very, very successfully over many years during the uptake and downtake of Russia and was capable of managing the profitability extremely well and also running an integrated retail organization with our distribution centers.
In his last assignment, which he's done for approximately two years, he was running our emerging markets organization out of the Middle East and has already started in the global ops organization. He is not on today's call because we have a global supplier summit, which we have twice a year in China. For obvious reasons, he's attending that and ensuring that we have a close alignment with the suppliers. Of course, working capacity, which I'll get to at a later stage in my presentation. Which makes me move on to our three strategic priorities, Speed, Cities, and Open Source. I will start with Speed and give you some highlights around that. We look upon Speed in many areas of context, but two I would like to speak about today is how we utilize our Speedfactory to produce limited editions to celebrate cultural and sporting moments.
For instance, the Boston Red Sox, the World Series, or the Washington Capitals Stanley Cup champion, to make dedicated product for a given event, or use it in the context of our 4D Carbon shoe, making cool shoes in very low series that has a specific purpose at a specific period of time. Driving speed and flexibility into organization. Secondly, our focus on key cities. Our six key cities in the world continue to set a pace and an influence for the rest of the world on how fashion and sports trends are being created and also being rolled out. In L.A., we brought sport and culture to life together with over 20,000 consumers at our 747 warehouse event, dominating the NBA All-Star weekend. In Shanghai, 60,000 consumers interacted with us in our Republic of Sport and through sport activities.
MakerLab and many other interactive experiences were present. We opened two new flagship stores, one in Shanghai and one very recently in Paris. Next one to come is our next large flagship store, which will open in London. Lastly, but not least, is our Open Source activities. Getting inspiration and innovation from other sources than within our company. One of the most unique is our focus on Parley and Parley related products, so product made out of ocean plastic. In the past year, we sold more than 5 million pairs of shoes made of ocean plastic, and this year we'll sell more than 11 million pairs of shoes. This is driving a fundamental impact on the environment, but of course also is differentiating us in the marketplace as being the leader in sustainability and converting "garbage" into usable performance product that are highly appreciated by the consumer.
Of course, our cooperation with Kanye West, which has been on for many years now, starting very focused on only creating heat. Last year was the year where we brought more new products into the market than ever. Still driving scarcity into new products, but making hype releases or volume releases with the Yeezy 350 Volume 2. You will see a similar launch pattern this year. Continue to drive new and cool products in, but also democratizing, as Kanye would call it, the Yeezy, and making a bigger business. It's not brand or commercial, it is brand and of course also commercializing some of the older Yeezy products. Which brings me onto the four accelerators that we defined, which are very KPI driven and really helps us move the company forward from a P&L standpoint.
From a portfolio standpoint, we continue to look upon diluted countries or diluted categories and on a quarterly cadence go through, define action plans, and follow up on those. Whether it's the brands that we sold off in the past, CCM or TaylorMade, or countries that has a highly unstable political or financial environment like Brazil or Argentina, we have a very disciplined process to address those and make certain that we optimize the opportunity in those countries instead of just letting it go. Of course, Reebok is also in that category, and as we'll speak about later, Reebok did return to profitability in 2018, two years ahead of our plan. We have our North American focus where we have made tremendous progress, not only in the size of our business in the U.S., the market share we gained, but also the profitability that we're gaining.
This will continue to be a focus on us also moving forward. We expect the margin to be diluted, as we said all the time, at least to the end of this strategy period. I'm certain Harm will take you through some of the progress we've made on the margin side. On the one adidas, whether it's our global non-trade procurement organization, which was put in place about two years ago, and where we've gained substantial benefits that we're reinvesting in other parts of the business, or our global business solutions, which is our shared services organization. That organization today has more than 700 employees, and a couple of years ago, it was down to 200.
Tremendous progress also in driving scale into organization that has a dilutive impact on our earnings right now because we continue to invest in it, but will have a very substantial impact in our next strategy cycle. Lastly, but not least, the impact of digital. Whether it's our global app that's live in 25 countries or our outstanding e-commerce growth, each of the four accelerators, portfolio, adidas North America, and adidas Digital, have had a substantial impact on our overall business. Now let me take you through the numbers at the high level. In 2018, we saw currency neutral growth of 8%, taking our total sales to approximately EUR 22 billion, based on approximately 3% nominal growth rate. We saw an excellent improvement in profitability, up 110 basis points to 11.5%, highest in the history of our company.
We saw net income from continued operations increase 20% to EUR 1.709 billion. At the same time, we are returning money to shareholders or cash to shareholders, approximately EUR 1.5 billion. We'll continue that course which Harm will take us through in his section. When we look upon the strength and weaknesses in 2018, of course, we saw both. Let me start with the areas that we were less happy with. There's no doubt that development in Europe was a disappointment for us in 2018. We have taken appropriate steps to address the issue. We expect Europe to come back to growth at the end of 2019. It's clear also with the size of Europe, it has a negative impact on our overall growth rate.
The 8% comes despite the non-contribution from our European organization. We saw challenges in some of our lifestyle accounts, which also had a negative impact on our numbers and some of the key franchises were, particularly in the beginning of the year, not fully meeting expectations. The latter part of the year, we see some substantial improvement in the launches. We saw Originals normalizing from very high growth rates in the past, but it also reflects a managed decline of our Superstar and Stan Smith shoe. Let me just pause here for a second and say, Superstar and Stan Smith, we took down by the size of EUR 500 million in 2018. We managed the revenue line down EUR 500 million. Of course, we needed to offset that when you do an apples-to-apples comparison with the growth of new franchises.
On face value, the OpEx was levered, the margin was levered by some of the investments that we're making. Whether it's in the scalability of our organization, as I spoke about, or the very aggressive investment into our brand to take our brand investment to an all-time high. We saw less OpEx leverage because we continue to invest for the future. There are also areas that we were highly satisfied with. First of all, progress around all the strategic growth drivers, North America, Greater China, and e-com all delivered double-digit growth. We saw significant growth in our Sport Performance coming from double-digit growth in training and running. We saw better than expected gross margin, and it really shows that we're focusing on the quality of our top line, which is paying off. We're not chasing revenue for the sake of revenue.
We're chasing it to make certain that we make money on it. We saw strong profitability improvements while continuing to invest in compensating FX headwinds. We continue to see FX headwinds in a year where we had the highest profitability ever in the history of our company. Last but not least, as I said before, Reebok returned to profitability despite top-line challenges, and I'll get to more details in a second. When we look upon the P&L highlights, 8% growth in currency neutral, 3% in EUR terms, meaning that approximately EUR 1 billion were lost in currency translation. Gross margin up 140 basis points to 51.8%. Again, despite FX headwinds, we saw the operating margin up 1.1 percentage points to 10.8%, and we saw net income going up 20% to EUR 1,709 million, and basic EPS from continued operations up 20% to EUR 8.46.
The reason why you say 20 on this, why is there no impact on the share buyback, is that we're looking upon the EPS count at an average head count throughout the year. Of course, the number of outstanding shares are, as we speak, less than this. This is how the appropriate accounting is. If you look upon and say, where do we get the growth from? We saw double-digit increases in the strategic growth areas that we defined, North America, Greater China, and e-com. Let me just try to put it in context. North America, we have doubled the business in the last three years. Greater China, we have doubled the business in the last four years. At e-com, we doubled the business in the last two years. Our growth drivers has had a substantial impact on where we're taking the company.
We'll continue to focus on the three, but if you look upon it, we still have enormous opportunity in these markets. In North America's example, Dick's was the biggest growth driver, Dick's Sporting Goods in 2018. When we look upon the adidas brand, we saw double-digit increases in North America and Asia Pacific. It grew overall 9%. Sport Performance grew 9% and Sport Inspired grew 11%. You can see that from a rounding standpoint, both of them grew almost at the same rate, which is good. We're getting a much more balanced growth picture now than we've had in the past. Of course, we'd like it to grow quicker, but I think the balance of the growth is very important. We also saw Reebok returning to profitability after having lost more than EUR 150 million in 2016. The Reebok Muscle Up plan has delivered substantial results.
We're still seeing a revenue decline. Let me put the revenue decline into the following context. We've, in the last two years, closed more than 250 stores. We've taken more than EUR 200 million of business out, which have low quality. We now build a foundation where you can see that the gross margin is now up 3 basis points at 43.7, which allows us to now start making money in Reebok and actually allow the business to grow. Of course, our plan up to 2020 is unchanged. That is growing brand heat and growing profitability. Brand heat is translated into growing the business. Yesterday, Dick's Sporting Goods mentioned Reebok. I think there's an important clarification I need to make here to make certain that we're clear on it.
With Dick's Sporting Goods, who is one of our most successful partners in the world, we have two relationships when it comes to our Reebok business. We have a licensed business, and we have a normal reselling business. The licensed business is a contract that is about to expire that gives Dick's Sporting Goods the right to create products under the Reebok brand and sell them exclusively within the Dick's Sporting Goods store. That is what is expiring. We'll continue to do business with Dick's Sporting Goods in our normal way of doing business for the adidas brand and of course, also for the Reebok brand. I did want to clarify this. What has expired or is expiring is the license agreement. It is not our business with Reebok within Dick's.
Moving on to e-commerce, we continue to see exceptional strong growth with 36% in the past year, where we're seeing double-digit growth across all regions. We see the launch of our Creators Club in the U.S. and Japan has helped us drive traffic to the site. We also launched our app, which is now live in more than 25 countries with more than seven million downloads. Our app is moving in the right direction and allows us to customize our engagement with the consumer and ensure that we communicate in an appropriate way, and thereby also optimizing the commercial value of the consumers that are using our app. If you look upon and take 2018 into review, we did see a strong performance despite the current setup.
We grew our currency-neutral sales at high single digits despite the challenges we had in Europe and the managed decline of Stan Smith and Superstar to the tune of a EUR half a billion. We did increase our gross margin by 140 basis points to a new record of 51.8, despite more than 100 basis points of transactional FX headwinds. We did expand operating margin by 110 basis points to a new record of 10.8, despite an increase in our marketing investments of more than EUR 300 million. We did not achieve our margin expansion by saving on the brand, on the contrary. We delivered a 20% bottom-line growth despite FX translations, reducing nominal sales growth by more than EUR 1 billion. We exited the year with extremely clean inventories to ensure that we have what we call prudent accounting within our company.
In many ways, this was a year that we were very happy with. There is no doubt that there are also areas that we could have done better, we came out and left 2018 behind us, which we call in many ways a very successful year, and from a reporting standpoint, the best year in the history of our company. I would now like to hand over to Harm, who will take you through further details when it comes to the financial side. Harm, please.
Thank you, Kasper. Good morning, good afternoon, ladies and gentlemen. I will guide you now through starting with the growth by markets. Growth was driven by double-digit sales increases in North America and Asia-Pacific, as Kasper mentioned, the two markets which I shortly discuss in more detail later on alongside also Europe. Let us briefly look into our three remaining markets, which were all able to improve their profitability levels in a rather challenging environment. This again shows where we start to scale our business and how the focus on profitability actually pays off. Starting with the emerging markets, which was down 3% as we had to focus on profitability in several countries that faced headwinds from a macroeconomic or geopolitics. This allowed us to improve our gross margin by 360 basis points and to drive operating margin increase of 280 basis points in emerging markets.
When we look at Russia, CIS, we actually increased 1% despite a significant amount of store closures in 2018. Again, we closed more than 150 stores in 2018. We continue to ensure quality of our top line, of course, with some support of the World Cup 2018 happened in Russia, which resulted in a gross margin increase of 90 basis points. As a result, the gross margin increase as well as the OpEx leverage led to an operating margin that increased by 400 basis points in 2018. Also in Latin America, sales increased 6% despite what is a challenging macro backdrop. I just want to mention Argentina there specifically. Thanks to the gross margin increase of 280 basis points and some leverage on the operating expenses, we were also able to improve the operating margin by 300 basis points.
Of course, Latin America was to some degree positively impacted by the World Cup 2018 as well. If we go into more details into North America, as Kasper mentioned already, currency neutral sales increased by 15%. I just want to highlight adidas brand revenues growing 17% in 2018, very balanced across Sport Performance and Sport Inspired. The Reebok brand actually was flat in 2018, let me highlight there as the U.S. market alone grew 2% it was offset by a little decline in Canada, also classics were growing faster than the sports segment. Overall, also there, the leverage on the gross margin operating expenses led to 390 basis points improvement of the operating margin to now 14.9%.
Just to go back when we launched Creating the New in 2015, this is now 12 full points of improvement over the last three years in North America. When it comes to Asia-Pacific, again, strong double-digit growth. It's the second of our three growth engines. This of course is driven by China with 23% currency neutral, but also there the adidas brand overall up 16% with double-digit growth in both Sport Performance and Sport Inspired. The Reebok brand revenues were up 3% with a decline in sport compensated by a high single-digit growth in Classics. There again, gross margin was up due to better pricing, product and channel mix that compensated for some FX headwinds and an overall operating margin slightly down by 30 basis points. Still at a very high level with 32.7% in Asia-Pacific.
When it comes to our home market, Europe, as we indicated after Q1 in 2018, we finished with a flat environment in 2018 on a currency neutral basis. It was a sequential decline in 2018, but the adidas brand revenues remained stable. Growth in Sport Inspired, offset by low single-digit declines in Sport Performance. The Reebok brand after a significant growth in 2017, a slight decrease of 3%. Despite some FX impact on the gross margin, the team has been able to improve the gross margin by 200 basis points as we continue to invest heavily into the marketing in Europe. I just want to mention again the marketing spend just in Europe was up 10% and it comes without saying it's the highest percentage across all the markets and the highest absolute amount across all the markets as well.
There's no other region where we are spending as much as in Europe, and that's what I'll highlight here again. Also we have been very disciplined on the inventories. There's a decline actually of double-digit also on the inventories. All of that still led to a flat margin of operating margin of 20%. So far to the markets. I would like to explain a little bit our new P&L structure as we report in 2018 and going forward, because it slightly changed. In the context of the adoption of IFRS 9 and the consequential amendments to IAS 1, we adjusted the presentation of other operating income and other operating expenses in order to allow for a more granular view of the company's operating expenses at the face of the full year P&L.
As of 2018, the presentation of other operating expenses is better aligned with our internal logic and includes the following line items. We will be transparent around the marketing and point of sale expenses. We will then have the distribution and selling expenses. Lastly, we'll have general and administrative expenses and sundry expenses. The last two, we'll definitely where you'll see the leverage of our scalable business model very clearly, going forward. Prior year figures for all these line items are shown in our 2018 P&L. Furthermore, as required by the amendments to IAS 1, impairments of financial assets are presented as a separate line item with other operating expenses. This is what we're going to do for the full year. For the quarters, we will report marketing and point of sale expenses, as well as operating overhead expenses, a logic that you're familiar with.
We clearly differentiate going forward between the marketing investments and the operating overhead leverage in more detail. When it comes to the P&L, as Kasper mentioned already, these are nominal numbers. Nominal, we grew 3%. Currency neutral has been 8%. As a CFO, I have to say I'm proud of the team, what they have delivered, because this really shows you with the 3% nominal growth and the discipline in the pull model, we have been able to enlarge the gross margin by 140 basis points. You clearly show how we invested into the marketing point of sale expenses was more than EUR 3 billion, the highest we ever had. It grew by 10%. You see then the leverage of the other operating expenses with 30 basis points, and we only allowed a growth of 2%.
That led to an operating profit of 10.8%, the highest we ever had, and a resulting net income of EUR 1.709 billion from continuing operations and a basic earnings per share from continuing operations of EUR 8.46. Again, I want to highlight here again, as we start to have a more scalable business model, only with a 3% top-line growth nominal, we were able to improve the net income by 20%, which is a factor of five to six, in 2018. That showcase again, what we have done to our business model. If I want to show you some more details on the operating margin bridge. You see again, as we discussed, we improved our operating margin by 1.1 percentage points. Again, don't worry, we know how we are calculating it. It's a rounding.
Of course, a 9.8 to 10.8 looks like 1%, but if you go beyond the rounding, it's 1.1%. If I decompose that, the gross margin was up 140 basis points despite more than 100 basis points of FX headwind in 2018. This shows again the quality that we focused on at the top line and stayed disciplined on the pull model and not moving into a push model, which is also linked to what Kasper said earlier when we managed now the key franchises like Stan Smith and Superstar very early and very planned in the process. Our continued investment into marketing weighed on our margin development in a magnitude of 90 basis points, we are partly offsetting that through the leverage operating expenses. Again, if you look at that net operating expenses, it's 50 basis points deleveraging.
Still, despite the investment into the marketing, we have been able to deliver an operating margin of 10.8%, which we definitely should be proud of. When it comes to the operating working capital, you see the result. I was always talking about every quarter about getting below 20%. 2018 now was the first year where we got below 20% from an operating working capital over net sales. It was exactly 19%. The result of that is very disciplined and inventories being down actually 5% currency neutral. The receivables only being up according to our top line also in the fourth quarter. On the payables, you see also partly one-time effect from our efforts on non-trade procurement, where we extended our payment terms. That's where you see a healthy 70% up, which helped us to bring the working capital down to 19% over net sales.
Given the strong P&L and the discipline on the working capital, you also see the results on the net cash. Also there, with more than EUR 900 million, EUR 959 million, we are up by EUR 475 million, which is a significant improvement over prior year. Our equity ratio stayed above 40% with 48%. The cash position allowed us to continue to invest into our infrastructure, into our presentation of our brand. We almost spent EUR 800 million to drive to a top-line growth. First and foremost, in a controlled space where we opened more than 200 new stores. We remodeled more than 100 existing ones, and we kept investing in our franchise doors, whether it was in China primarily, but also around the world, and leverage further our shop-in-shop presentation of the brand with our key accounts around the world.
We keep investing into IT, primarily there, not just into the infrastructure, but also into digital. As you know, we keep investing in our warehouse structures around the world, and we opened many warehouses successfully across different markets. Unfortunately, we can't see that. Also the two pictures, we already opened a new catering and meeting facility here in Herzogenaurach, and we will open in the second quarter our new headquarter that you see in the background on that picture. Where more than 2,000 people will move into, and then all of our people here in Herzogenaurach will live on one campus. As Kasper mentioned earlier, we keep investing into Portland and have opened a new building in Shanghai as well. With that, I move to the cash return to shareholders. As you have read this morning, we propose a dividend of EUR 3.35 per share for 2018.
This would be up 29% versus the prior year and would result in a payout ratio of 39%, slightly up also from 2017. This is right within our target corridor of 30%-50%. Also in 2018, to be specific, we returned roughly EUR 1.5 billion in cash to the shareholders, EUR 1 billion through our share buyback plan that runs through May 2021, and a dividend payment of EUR 500 million in 2018 for 2017. We want to continue that in 2019 with the continuation of our share buyback plan in the amount of EUR 800 million in 2019. Then, if it's being approved, we propose on dividend another EUR 700 million in dividends in 2019 for the year 2018. Also there, a consistency of EUR 1.5 billion in 2018 and in 2019 again.
Before we move to the outlook that Kasper will guide you through that one, I would like to briefly explain the estimated impact of the change of IFRS 16 on our 2019 P&L. As you know, our lease obligations in our case is around EUR 3 billion are to be capitalized, which has various implications for our P&L. Above the line, lower rent expenses are mostly offset by higher depreciation and amortization charges, leading to a positive impact on operating profit of around EUR 10 million. However, due to the interest component now booked in the financial result, net income is expected to be negatively impacted in a magnitude of around EUR 35 million in 2019. To be clear, all those estimates are based on lease contracts as of January 1, 2019, and are subject to some change depending on the development of our store counts as we move through this year.
This is purely an accounting effect, and we don't expect a meaningful impact in future years. With that, I would like to hand over to Kasper for the outlook.
Thank you very much, Harm. Let me now take you through the Outlook, excuse me. Eventually, that will be output also. First, let me speak about the supply chain shortages that we will be experiencing within 2019. Clearly, it's not something that we're happy with. In essence, it means that we have an excess demand that we can't cover due to insufficient capacity at our manufacturing plants. It's predominantly related to apparel, and it's predominantly related to North America in the first 2 quarters. Consequently, growth is going to be expected to negatively impact it, particularly North America during the first half of the year. We estimate that the overall impact on the company full-year growth rate in 2019 is anticipated to be between one and two percentage points.
If you add the one or two percentage points to the EUR 20 billion basis, you're speaking about a EUR 200 million to EUR 400 million impact. We will be able to scale the respective supply over time, but it will have this impact, as I said, predominantly in the U.S. in the first 2 quarters, which also means that the growth profile of our company, which I'll get back to, is going to be back-end loaded more than we're normally used to. When we look upon the focus areas of 2019, we're looking into different dimensions of innovation. We'll continue to invest for impact, that means as close to the brand as possible.
We will be tackling challenges decisively, and I hope that despite what we showed you right here, that you are seeing that we are decisive about changing the company and changing what we need to do and continue to deliver whole proportion net income growth. Let me just give you some examples what we're trying to do. From an innovation standpoint, I will take you through a number of the initiatives that we created, and I think that we are very excited about and hope that you'll be excited about as they're hitting the market, and some of them are hitting the market. Starting with evolving icons from the past. As I said in the beginning of our presentation, we are celebrating our 70-year birthday. We have the single biggest history and library of icons that we have been reviving and will continue to revive.
Take the Yung-1 and Falcon, both retro running styles from the '90s that we refreshed and brought back with significant commercial traction. The TRESC Run and the LXCON also great examples for new silhouettes that are interpretations of vintage running styles from the '90s. The Supercourt, on the other hand, captures authentic details from our tennis archive in a modern way, adding another dimension to the clean white sneaker. Reebok is equally well equipped thanks to its rich heritage in sport. The brand relaunched Aztrek, a distinct chunky silhouette, and tapped a number of artists for renditions of its signature style sales in the ongoing Alter the Icon series. There are many more examples in our icons, but I wanted to mention this.
Our archives are deep, and we believe that the iterations we have coming out and those that are out are highly attractive from a consumer standpoint. We'll continue to build new franchises. We just launched the UB19, or as you know, the Ultraboost 19, the next generation Ultraboost franchise, which we developed into being an icon in no time. The new generation not only has a completely new look and feel, its performance credentials have also been upgraded. It features 20% more Boost yet and is lighter than ever. The Nite Jogger, the Originals' latest franchise edition, combines nostalgic design language with modern technology, including Boost in Reflective Upper. Separately, Originals introduced Sleek, a fashion-inspired concept that reinterprets classics through a woman's lens. With the launch of Free Hiker, we not only launched a new product, but a completely new product segment in outdoor footwear.
Hiking is on trend over the world, but sadly, the footwear offering that has been available to young hikers has not been. It was brown, it was leather, and it was old-fashioned. We've changed that. Retire your chunky old hiking boots and put on your Free Hikers, a segment that we believe has huge opportunity. N3XT L3V3L is the first-ever laceless basketball shoe from adidas and features our new Lightstrike midsole, born in our Brooklyn creator farm and influenced by conversations with athletes in New York City. It's designed to lead basketball's ongoing evolution. We also believe with technology, we can make major differences. Our Futurecraft 4D collaborations with Carbon is a game changer. What started out as a conceptual innovation has not only allowed us to rethink manufacturing processes, but to create an entirely new midsole technology that breaks ground in performance and in comfort way.
4D will scale and in the future be featured in pivotal products across several categories. We had lines outside our stores for recent AlphaEdge releases, and the first drop of our ZX 4000 was sold out instantly. We just only started to bring 4D shoes to many more of our consumers, a huge opportunity for us moving forward. Then, of course, it's entering new technologies through materials. One of the areas that we're most excited about in our company is our Parley and ocean plastic activity. Taking it from a shoe to a complete platform will have a unique impact in the way we sell and bring products to our consumers. In the last year, we sold more than five million pair of Parley shoes. This year, we'll take it to more than 11 million, and we're introducing not only shoes, but shorts, T-shirts, outdoor jackets, and swimwear.
A new platform where we're differentiating dramatically from the competition, but also building our leadership position in sustainability. Breaking the rules of the game, taking Yeezy to a different level. 2018 was a good example of where we took the Yeezy 350 and started democratizing it. At the same time, while doing about 20 launches last year, we also brought new products into the market, whether it's the 500 or the 700. This year, we'll have many more launches, and it will be a mixture of very high scarcity launches where we want people to stand outside the store, and of course, launches where we're going to put more volume, particularly behind the 350 in different iterations. It's not whether the Yeezy brand can stand it.
It is the Yeezy brand now has a product set that is wide enough to actually play different roles with different shoes, scarcity when we need it, volume when we need it, and of course, a continued launch of product throughout the entire year. The Kanye West Yeezy relationship will continue to be brand driver, but of course, we'll have a commercial aspect of it without compromising the two. Our collaboration, which is new in the way we've done it before. Open Source is one of our three strategic choices, and with this mindset, we're opening our doors to collaborations of all kinds. This result in product releases that consumers haven't seen before.
Just when one of our most or the most popular shows in history is coming to an end, we have teamed up with the HBO team to release a six-piece set of adidas Game of Thrones Ultraboosts, which you can find on our website. I personally looked upon it last night on our German website, and I was excited about what I saw online. The adidas x TfL feature limited edition supported by the London Underground with subway lines prominent embedded into the sides of our shoe. You probably remember that more than a year ago, we did a similar launch in Berlin. We're doing conceptually a launch in London but with a completely new shoe. Switching gears, we're partnering up with STATION F, the biggest startup campus in the world, based in one of our key cities, Paris.
Our global sports accelerator program, Platform A, has launched at STATION F, we're working with the next generation of creators on business models in the areas of digital, sales, and health. I went there personally last Friday to see some of the initial solutions that are coming out that we'll be implementing. Winning where the win is, globally and locally, mean that we launched a new partnership with Foot Locker to co-create Speedfactory footwear for key events in sport and culture. This partnership will allow us to capitalize on such events and to empower consumers to help drive footwear creation. Created at our Speedfactory in Atlanta, the first concept from this partnership were limited editions, AM4ATL shoes, which were launched in January to celebrate the Super Bowl taking place in Atlanta. At the same time, we partner up locally.
The latest round of AlphaEdge 4D releases included bespoke initiatives with sneaker boutiques like Footpatrol in London, Sneakersnstuff in Copenhagen, or INVINCIBLE in Taiwan, to name a few. Of course, we're working closely with JD, not only in the U.K. and Europe, but also in the U.S. through Finish Line to ensure that we bring unique creations to the market through the largest retailers in the world. We're also redefining our activation. We're activating our new products and concepts vis-a-vis consumers, and we're doing it in a new way. Members of our Creators Club will soon be able to engage with our brand in an unprecedented way through Speedfactory and Creators Club. That will allow our members to vote on designs through adidas app, and the most voted design will then be produced on demand within two weeks through our SpeedFactories.
We're seeing different ways of bringing products to market. We'll continue to invest in our brand, whether it's through the All-American Bowl , you know, football in America, sport the unexpected through our Reebok brand, the All Blacks, the best rugby brand in the world that will start the World Cup in the third and the fourth quarter in Asia, our new signing of Arsenal, the FIFA World Cups, or She Breaks Barriers, a way of engaging more women in sport. We are using a marketing working budget for our marketing investment as a key differentiator. That brings me to our guidance. We will be driving a sales number between 3%, 5%, and 8 percentage points, despite the fact of our 1 to 2 percentage points, quote unquote, "missed revenue" due to our supply chain issue.
We expect our gross margin to increase to approximately 52%, and our operating margin to increase between 50 and 70 basis points, taking to 11.3% to 11.5%. We're guiding in two different ways. We're guiding on a like for like, which you can see on the left-hand side, increase our net income of 10% to 14% to EUR 1,880 million to EUR 1,950 million. If you take the one-time item inclusion that Harm mentioned, that will have a negative impact and increase our net income from 8% to 12% instead of 10% to 14%. We expect that, as we said before, that the impact will be of net events moving forward, so it's a one-time item. On a like for like, we continue to explain the net income of EUR 210 million.
That also means that we're confirming our long-term guidance for 2020, bringing our net sales growth over the period of time of a CAGR of 10% to 12% on net income of 22% to 24%. Net sales, as a consequence of the growth between 25% and 27%, of course, depending on currency, our e-com approximately to EUR 4 billion and operating margin of 11.5%. We already received questions from many of you, why am I not changing the 2020 guidance? Let me just be very clear on this. Until now, we've had the guidance within the year and the long-term guidance. Now we have two years that are neck to neck. What we are doing is we're confirming our long-term guidance, which we put out, revised twice throughout the period. Last time was March 2018.
In March 2020, we will of course guide for the fiscal year 2020, we're not going to guide for two fiscal years in the same year. Right now we're guiding for 2019, into 2019, and we're confirming 2020. Should 2020 have a different outlook, we will make that guidance in March 2020. I do want just to say one thing, if you look upon the original guidance of our Creating the New in 2015, those numbers we've hit two years ahead of plan. Of course, we have re-guided twice because we want to make sure that we have an ambition guidance for a company that will make it more attractive for investors. If you take the first three into account, our net sales gone up by EUR 5 billion. Our marketing investment has gone up by EUR 700 million.
Our operating margin has gone up by 430 basis points and our net income up by EUR 1 billion. That is the contribution in the first three years of our five-year cycle. Huge progress in this context, we'll of course continue to deliver against our targets, I do want to put it into context. In summary, 2018 was successful and another year in our milestones towards 2020. We'll continue to further invest in people, infrastructure, and brand, as you have seen. We're staying the course with actively addressing challenges when they occur.
2019 will be another year of high quality top and bottom line growth, we will be focusing on a relentless execution of Creating the New to ensure that we'll come out of 2019 in a successful way that will allow us to deliver upon the final year of our five-year plan and deliver upon the commitment that we just reconfirmed to you today. With this, I'd like to stop our presentation spend the next 45 minutes on Q&A through Harm and I. I'll hand back to Sebastian Steffen now.
Thanks very much. Brian, we're now ready to take questions.
Sure. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for a moment to allow everyone an opportunity to signal for questions. We will now take our first question from Geoff Lowery from Redburn. Please go ahead. Your line is open.
Yeah. Hi, team. Two questions, please. Firstly, can you talk about what gives you confidence in the acceleration in sales growth across the year? Clearly, we know about the World Cup, and we can see the sales comps, what do you see in your product pipeline that gives you confidence in that acceleration? Second, can you talk a little bit more about what's driving the e-commerce growth? Is this number of new customers? Is this basket value? Can you just sort of help us understand what drives 35% e-com growth across last full year, please?
I will. This is Kasper. Hi, Geoff, thank you for your question. I'll take the first question and then Harm will take the second. If you look upon our growth profile for our company, that growth profile has been impacted by the supply shortages, which we just alluded to. They are more prevalent in the first half than the second half. That, of course, makes that we have a different growth profile than normally. We would have had a higher growth in the first one and two quarter, and then we will probably see a slight impact in the third quarter and a higher in the fourth quarter. We believe we have the product roadmap that allow that growth profile to take place, which is why we forecasted that. Right now, the growth part in the first half is negatively impacted, and that is why it looks backended.
If not, we would have, as you can probably imagine, guided differently because we would have guided one to two percentage points higher than we would have had. We don't believe it's a product roadmap challenge. It is an availability challenge that drives the current growth profile of our quarters. Handing over to Harm, the e-commerce.
Yeah. Jochen, I would like to add to this one also in Europe, because the order book for spring/summer 2019 was based on the sell-through in 2018. You will see a sequential improvement in Europe as well, going back to growth for the full year. That's why I always have been transparent. The first half will not be as good as the second half. Just on the e-commerce growth, it's not necessarily many more new consumers, but it's really about converting them better. Again, as we launch the adidas app and now active in 25 markets, it's impacting positively the mobile traffic to better conversion. That is one thing, and again, it's not necessarily about more consumers, about the frequency of the same consumer coming back. That is the second driver. Of course, in 2018 and less so in 2019, got to be straightforward.
Democratizing the Yeezy brand, it has definitely had some impact and it was primarily driven in the e-commerce channels as well.
That's great. Thanks for the color.
We will now take our next question from Antoine Belge from HSBC. Please go ahead. Your line is open.
Hi, it's Antoine Belge at HSBC. I think usually I like to ask three questions, but I think you prefer two, so I stick to two. The first one is relating to the supply issue. I think you mentioned this new EUR 200 million-EUR 400 million, which seems quite a high number for a North American business of a bit less than EUR 5 billion. Can you maybe explain a bit the type of products you're selling? I understand these are relatively low-price products below EUR 50, like T-shirts and hoodies. What's the scale of, especially in terms of distribution within the adidas business and it's a theoretical threat, I know, but is there a risk of developing low-price products compared to your higher-price products? My second question relates to Greater China.
I think you gave that guidance of double-digit growth for Asia as a whole, we saw a bit of a slowdown in Q4. You always said that this would happen. Maybe Q4 was impacted by some cleaning activities. Is it fair to say that Greater China could be going around mid to high teens in 2019? Thank you.
I'll start with the first question, Antoine. Thank you very much. We believe, of course, we're not going to go into all great level of detail, we believe that based on the volume impact and volume as a consequence of the capacity, that it's realistic, the number we just mentioned, one to two percentage points. It is predominantly U.S. it's predominantly in apparel. I would not say it's low-priced. What we have is that we entered North America on a high-price segment. We have now expanded that in the medium-sized segment. It is predominantly the U.S. because that's where the biggest expansion has taken place because we come from the slowest market share standpoint, which we have successfully built. We believe it's the right number.
Doesn't mean that we like the number, I think it's our obligation to tell you what the real number is. There is no way of mitigating that in the short term. Of course, that will have then subsequent impact on the growth rate in North America. That's the way the number is. We don't like it any more than you do. I don't think that would make sense to go any more in detail than it is. It's that we don't have capacity that we need to fulfill the demand. That is in essence, in summary.
On the second question, Antoine, as you know, we're not going to guide China specifically anymore. You're absolutely right. We guided double digit Asia Pacific. You can just assume that China remains the growth engine in that market. That's where we'll leave it.
Okay. Maybe, just to follow up on the supply issue would you agree that the issue to the fact that demand is much higher than expected or there is internal hit I don't know.
Your question.
Antoine, sorry. You have a very bad connection. We can't hear you, so, I guess we got to take this offline. Okay?
Okay.
Brian, next question, please.
We'll now take our next question from John Guy from MainFirst. Please go ahead. Your line is open.
Yes. Thanks very much for taking my questions. Good afternoon, Kasper, Harm, and Sebastian. Maybe just following on from the supply or the capacity constraint issue. Is it fair to, when you think about working capital and the relationship between the supply chain, I appreciate that you've moved more into the commercial market in the U.S., that's driving obviously at a different price point. You're expanding your consumer reach. Is it also a question that you want to be careful about the way that you put stock into that channel? It's maybe more exposed to markdown risk, and that can dilute some of the higher price point product that you're also putting into the overall market. Is it a question that you're just having to balance on this, or is it just very much about manufacturers not being able to meet the level of demand?
Because you've surely had some visibility around the order books over the course of the last three to six months. I'm just trying to understand the relationship between the way that you've managed your working capital very well in 2018, and the way that you look at your sourcing and supply chain flexibility. That's my first question. Second question, just around gross margin guidance and also gross margin in 2018. You talked about around 20 basis points of gross margin. You flagged that the FX impact would be broadly neutral. Could you talk about the areas of, or the level of investment that you're going to put in at the gross margin level within some of the regions, obviously Western Europe being one, and what the potential price mix opportunity could be?
Also, Harm, maybe just on that with the 140, you mentioned a negative 100 or more FX impact in 2018. Could you talk about some of the other drivers or moving parts in 2018 on the gross margin? Thank you.
Hi, John Kasper. Let me try to be clear on it. There is no correlation between the management of our net working capital and the capacity problem that we've had. In most markets we've actually have this problem. The products have slightly down the U.S., but that is not the root cause for this. The root cause has been the demand was greater than we anticipated, and we did not have sufficient capacity to satisfy that demand. It would have been great to say it in a different way, but it is actually not more complex than that. I think that capital has been managed extremely well by our other parts of the organization, but this has been clearly a demand and capacity forecast issue, not related to net working capital. It is not balance related.
Yeah, John, on the gross margin guidance. Again, 2018, we had a very successful year. It was 140 basis points despite the FX headwind. We also want to say, as we made so much improvement on the profitability, we definitely want to go back to growth, specifically in Europe. That's why we are driving or using some of the tailwind that we have on the margins through the FX and the hedging gains that we have, we want to invest that into the top line. Again, we were somewhat strategic on the one or the other price point. I want to repeat myself, we do not have a price challenge overall, but we want to be more strategic on the one or the other price point for specific products.
That's where we want to keep ourselves the flexibility to make sure that we're not overshooting on the gross margin. We are now operating at a 52%, which is an industry high, that we want to make sure we find the right balance for the full year between the gross margin and the top line. You will see probably an inverse effect of the top-line development versus the gross margin development. That's what I will update you quarter by quarter.
Thanks very much indeed.
We will now take our next question from Jürgen Kolb from Kepler Cheuvreux. Please go ahead. Your line is open.
Thanks very much. Two questions. On your marketing spend, I think in one of the capital market days, you mentioned that you wanted to bring the breakdown of the marketing spend down to about 44% sports marketing and 56% brand marketing for or by 2020. Are we on that path? Maybe a quick word on how that developed throughout 2018, and if this plan is reachable. Secondly, on Stan Smith and Superstar, you mentioned you managed it down to EUR 500 million or by EUR 500 million. Could you indicate from what level we're talking about? To put the whole thing into perspective, that would be helpful. Thank you.
Hi, Jürgen. This is Kasper. Right now, we are at the level or below the level that our original target was, from sports marketing and the rest of the marketing investment. We have reached that level today. We are consistently reviewing and saying, is that the right level? Should it be higher? Should it be lower? Because you are seeing a change in the sporting landscape. We have managed it exactly to the point where our target for 2020, we are that or below that range, and we're now evaluating what is the appropriate number moving forward. I don't want to give any guidance on this number right now because, of course, the market has changed since we started out, and right now, the market might move in a different direction that would allow a different spending pattern.
We have done what we said we're going to do. On the Stan Smith and Superstar, obvious competitive reasons, we can't tell you from where the number came from. It was set in the context of that we've been growing by 8% at the same time as we've taken two of our most iconic franchises down by approximately two and a half points of revenue. Had it been stable, we would have a revenue stream or growth that would have been two and a half points higher. That was the reason why we gave the indication. As I said, we cannot give you the actual size of the business because frankly, that's a competitive information that we don't want to come out.
Fair enough. Thank you very much. Super.
We will now take our next question from John Kernan from Cowen. Please go ahead. Your line is open.
Good morning, everyone. Thanks for taking my question, and congrats on all the momentum.
Thanks, John.
Can you just talk about the margin performance in North America? Obviously up significantly throughout the year, including fourth quarter. Gross margin performance was very strong. Inventory levels have seemingly been managed well. Can you talk about how much more margin profile there is to gain in North America? The operating margins obviously expanded very significantly the last three years. I'm just wondering how much margin room you feel there's left to move this higher. Thank you.
Just real quick on the gross margin, first and foremost, we saw what I said after the Q1 results already, the sequential improvement, because we had some hangover of the products given the warehouse issues that we had in 2017. We had to do some clearance in the first half of 2018, that's what you saw in the margin the first half, then we are back to normal, what you saw in the second half, primarily in the fourth quarter where we have a healthy business. Going forward, it is a competitive market again, we want to continue to take market share there I'm more focusing on the operating margin improvements where we made tremendous progress.
I said it earlier with the presentation, 12 full points over the last three years, that's something we want to continue to make progress on I even believe we leveraged too much the organization the last two years. Yes, we want to continue to have healthy margins, the channel mix right now is not helping us tremendously because we are growing pretty significantly with wholesale as well, it's not just all in e-commerce growth. The size of wholesale is just significant, especially in the U.S. market, that's where we are under-distributed that's why the margin mix is rather negative than positive given the opportunities that we also have in wholesale. Made good progress, especially 2018 impacted by the first half in clearance. Going forward, I'm more focused on the operating margin improvement in North America.
Excellent. Thank you. Just on that topic of channel mix, how are we thinking about growth between retail and wholesale globally that's embedded in your guidance for 2019? Thank you.
You got to differentiate that market by market. As I just mentioned in North America, there's a negative effect given the size of wholesale. There's a positive effect in Europe where we're driving a lot of D2C or specifically e-commerce growth in our home market, and it's a neutral effect in China or Asia Pacific. You've got to really go market by market. Given where we are with the progress that we have made on e-commerce, still the positive channel impact of e-commerce or direct to consumer is still limited given the growth opportunities that we have still in North America.
Excellent. Thank you. Best of luck.
Thank you, John.
We will now take our next question from Andreas Inderst from Macquarie. Please go ahead. Your line is open.
Yeah. Hello, everyone. I have two questions. The first one on free cash flow, extremely strong. You more than doubled free cash flow in 2018. It's now 9% of sales, up from 4.5%. I understand you expect working capital to go up slightly, CapEx up slightly. Harm, what is a reasonable cash flow assumption for 2019 and 2020, particularly given the strong development in 2018? My second question is again on the supply chain. How could that actually happen? There should be plenty of overcapacity or good capacity in Asia in the supply chain. Why could that have not been mitigated? Related to that, is that a missed opportunity or would you expect, with your key accounts, you are not able to deliver to recoup some of the lost sales? What is actually the impact on profits?
Is there a one-off cost associated to get the supply chain back on track? Thank you.
Yeah, just on the free cash flow, Andreas, thanks first of all for your compliments. In 2018, we indeed made a lot of progress. We're not going to give a guidance for 2019, but I tell you as much as you should consider, first of all, when you have a positive impact on working capital in 2018 to the significance that we had with strict inventories, strict receivables, and to some degree, a one-time impact on extending payment terms with our contract procurement vendors, that effect will not be repeated in 2019. The one-time benefit in 2018, that will not be repeated in 2019. Then, as you know, as we continue to grow in 2019, we will also see that on the inventories again, as we indicated, the operating working capital will slightly go up. Again, CapEx, as you mentioned, is pretty much prior year levels.
Again, all in all, as the one-time effect will not be repeated, we will be somewhat lower than in 2018, but still on a healthy direction.
Thank you for your question, and I can give you a long and a short answer. I think I'll try to give you a frank answer. Of course, these are things that shouldn't have happened, and the management board was notified too late, and we're dealing with the matter. You can see from a guidance standpoint, continue our guidance within the range that we have set in the long-term guidance. Expanding our EUR 210 million, that shows also that we are managing the company in a very sustainable and, I would say, prudent way.
I think it would be misleading to say that the missed opportunity that you can pick up because, quote-unquote, "The T-shirts you're not selling today, the consumer is not going to wait four weeks to buy that T-shirt unless it's a unique product." There are certain products that are unique, but this is mostly in apparel, and that's why we believe that the one to two percentage points of business that we indicated that we're not going to get is a realistic one, i.e., that the missed business you're not going to pick up. From a profitability standpoint, we've been clear on what we do from a guidance standpoint, the way we operate the company. You're not going to see any actions from our side that hamper neither 2019 or the 2020 targets we have on board. Of course, it's not something that we are immensely proud of.
Thank you.
We'll now take our next question from Erinn Murphy from Piper Jaffray. Please go ahead. Your line is open.
Great. Thanks. Good afternoon. Two questions from me as well. First, just on looking at the 2020 plan that you've confirmed today. It calls for EUR 4 billion in your e-com business, which would be a double from here. I know you've doubled the business in the last couple of years, but I'm just curious, as you look at it now, what are those key drivers that give you comfort in hitting that? Are there any specific regions there that are majorly under-indexing today? My second question is related to just the broader competitive environment. Would love, Kasper, if you could talk a little bit about what you're seeing, in both North America and Europe currently. Thank you.
Thank you very much. As you know, when we guided, we gave a framework of guidance, and one of the most important areas we wanted to change in the company was the direct-to-consumer experience through a digital experience. Right now, we came out with what we felt a strong number in 2018. There's no doubt we need to continue to deliver a strong number in 2019 to get to the 2020 number. I believe that getting in the ballpark is more important than getting 100% to the number, or whether it's 3.8 or 4.2, I don't think the important part is. It's building a business model that allow this to take place because the EUR 4 billion can only be the first step. I don't want to speak about the new strategy.
If you look upon the position of the branded manufacturers, they have a lower digital number than most of the brick-and-mortar retailers. We are in catch-up mode, and we need to continue to catch up, and that's why we believe this is one of the most strategic areas that we have. We are looking upon how do we invest, how do we launch product, how do we become better in delivery across the entire chain? You can be assured that when it comes to investments around the entire e-com environment, whether it's either directly from us or ship from store or the app, we'll continue to push that envelope very aggressively, which we can now because we are a more profitable company. Your second question when it comes to the competitive environment. It has changed over the last couple of years.
Of course, you're seeing a somewhat change in the U.S. landscape. Some years ago, we had a very strong position from the biggest competitor and a new competitor coming up, or newer back point of time from the East Coast. There's no doubt that the bigger competitor has come back and is stronger now than two years ago. Reverse is the situation from our competitor on the East Coast, which if you look upon, particularly our position in North America, where we continue to outgrow the market and our competition. That is giving us a substantial opportunity to expand the lead over number 3 in the market. On the European side, the landscape has not changed much. In Asia, what you are seeing, you are seeing a stronger local manufacturer set, particularly in China. In China, us and Nike hold between 50% and 60% of the market.
What I'd like at least to leave you with is how we look upon the market. We think it is misleading if we compare ourselves "only to Nike." The combination of adidas and Nike is less than 50%. It's probably more around the 40%. I think it would be highly dangerous if we said the only competitor we have is the Nike. Our strategic goal is to grow market share and grow margin, and there's a lot of space in that market. We're looking upon the bigger ones, but we're also looking upon our upcoming ones. In summary, the biggest change in the market in the past three years has been digital. There's no doubt that digital is changing it in the context also of pure play, but also on new wholesalers like an Amazon that was not as active as a couple of years ago.
Thank you.
We'll now take our next question from Fred Speirs from UBS. Please go ahead. Your line is open.
Hi, gentlemen. Two questions from me, please. The first is maybe to come at the supply constraint issue from the other side. Could you just clarify exactly what you felt drove the higher demand for apparel than you were expecting? Was that all brand driven? Was some of that also market driven? The second question was around product categories. Footwear grew 8% in 2018. Could you talk a bit about how you expect footwear to grow in 2019, particularly between performance and lifestyle? Thank you.
Fred, could you please repeat your first question? We didn't hear it here.
Sure, my apologies. My first question, really just what caused the higher demand for mid-price apparel than you were expecting? Just so you give a bit of color around that. Was that all brand driven, or was that also a contribution from market growth there? Thank you.
Let me start with the first one, then Harm will take the second one. The reason why we have a different profile, the main profile in the U.S. than any other country is that our market share profile is different in the U.S. In the U.S., we started out at the very high end and moved into the mid-tier where we've been in previous years. That's why you're having a different demand profile or growth profile in the U.S. than you've had in many other countries. In China, as an example, we have a 25 to a very high market share, more than double that of the U.S., and that's why the demand profile is different. In essence, that's why we can go around it for a very long period of time.
I think that this is More or less a home-created problem that we're dealing with, and we're dealing with it to the best of our ability. The core demand profile that has changed has been the U.S. I'm not saying that is the only root cause for the problem. Handing over to Harm.
Yeah, Fred, on the second question, it is linked to the first question as well. As we started with Creating the New in 2015, we said we want to build the brand from the feet up. That's what we've done successfully. That also led to more pull on the apparel demand already in 2018, as you indicated. Apparel was growing slightly faster than footwear. We believe we need to continue to have a balanced growth across both without giving a guidance in 2019. As Kasper just explained, there's tremendous demand for apparel given where we raised the brand, especially in North America. Again, without giving a guidance, we believe it's more balanced going forward. I would also wouldn't be surprised given where we are, that the demand for apparel is slightly higher.
Now it's a question how we can fulfill that demand. That is part of the answer to the first question.
Thank you.
We'll now take our next question from Simon Irwin from Credit Suisse. Please go ahead. Your line is open.
Good morning or afternoon, gentlemen. Couple questions. Can you just talk a little bit more about Yeezy and reassure us that the kind of volume expansion that we're seeing in Yeezy, I think NPD said volumes are up six times in four Q, is sustainable, and that there is a kind of bigger market for price points of EUR 200 or more than perhaps we'd thought in the past. Can you also just talk a little bit more about the margin impact of channel mix on your business?
Let me start with the Yeezy. First of all, it makes no sense to look upon Yeezy in the context of any given quarter, because the Yeezy sales are completely related to when do we release which products with which volume. If you were to look upon it on a quarter by quarter basis, year over year, makes very little sense because it's totally related to our release calendar. That is number one. Number two is the sustainability of the Yeezy brand depends upon our capability to continue to develop hot Yeezy products. That is what we've been trying to get across, maybe apparently not eloquently enough. The difference between now and three years ago is, three years ago, we had one or two products. Today, we have 20-30 different products, and each of the different products play a different role.
Some will be scarce and will be running at the same price tag at retail. Of course, on quote, unquote, "the sneaker market has a very different price tag." Some we put out in larger volumes. Larger volumes, again, if you take the 350, there are probably 20-30 different iterations of the 350. You don't compare the 350 to a 350. It is a very differentiated way of looking upon it. We have many new products or many more products today than we had years ago. That's why we can spread it differently. I would just caution you from looking upon it and say, Yeezy is one Yeezy, because that is, I think, where some of the misunderstanding happens.
Yeezy is a product family that covers a number of different products, and even the 350 is a product family that due to its colorways and also materials, cover different products. The reason why we can manage it in a different way is that we have now the volume of different products in different variety, and each of the different products play a different role. That's why we feel quite comfortable with what we did last year and what we also do this year. As I said, it is a misleading indicator if you look upon a volume growth or decline within a given quarter. It is totally related to how and where we release a product and to which volume and to which way we'll release the product.
Yeah, I want to add to that, Simon. It's important that we remain in the pull model, and when we bring a product out, we've got to focus on sell-through and not just shipping it in. That's why it's also when we launch it on .com, we know exactly what the demand is. At the end of the day, the consumer decides, and we are a consumer-obsessed brand, and that's how we manage it. That is linked to the channel impact of the gross margin as well.
Of course, there's a positive impact as we continue to grow e-commerce over proportional, the bigger impact actually is staying disciplined on our selling model, that we remain in the pull model, that we are disciplined on inventory, that we're not shipping in more as the demand is there, and that is by far a bigger impact on the gross margin than the channel mix today. Yes, as e-commerce is growing towards our 2020 ambition, we will probably see more positive impact beyond 2020. Right now, it's just too small of an absolute number that the bigger impact is the discipline in the pull model, and that's what we focus on.
That's very clear. Thank you.
We will now-
Brian, we have time for two more questions.
Sure. We'll now take our next question from Chiara Battistini from J.P. Morgan. Please go ahead. Your line is open.
Hello. Thank you for taking my questions. The first one goes back to your apparel growth expected for 2019, and maybe related to that also, a question on the outlook for footwear for 2019. Just to confirm, are you basically implying that in H1, your apparel growth will be slower than full year 2018 or actually in line and you won't be able to capture the excess growth that you've seen accelerating? Along with that, what kind of outlook are you expecting then for footwear for 2019? The second question would be on North America and the slower growth in Q4. Can I just confirm if there was any impact from the constraints on supply chain already in the Q4? On the other end, the margins were very, very strong in Q4 in North America.
I was wondering if you could give us some more color on that very strong profitability. Thank you.
Yeah, Chiara, Harm here. On the first question on the guidance for apparel and footwear. Again, we're not going to give any guidance on apparel or footwear. Again, we got to balance out, as we mentioned, the supply challenges that we have given the apparel demand. Again, we do not give a guidance. We want to see a balanced year growth of both, and that's what you should assume in any of your models, that it's a balanced growth in accordance to our guidance for apparel and footwear. We'll update you every quarter how we are tracking towards that one. On the second question, whether there was a supply chain impact already on the fourth quarter in North America. No, there was no impact on the fourth quarter in North America, otherwise we would have looked into that one already earlier.
There was definitely no impact on Q4 from a supply chain capacity point of view.
Any color on the profitability in North America in Q4?
Well, as I mentioned earlier, we had a tremendous clearance in the first half and the profitability was driven by a better gross margin. Again, staying disciplined in our pull model that we only ship in as much as we sell through as well. Of course, with some of the Yeezy business that we had that we democratized the brand, not just in Q3, but to some degree in Q4 as well. This is all driving to a better gross margin and hence with the discipline in cost to better operating margin as well. That's solely what's driving it.
Great. Thank you very much.
Finally, we'll take our last question today from Elena Mariani from Morgan Stanley. Please go ahead. Your line is open.
Hi, good afternoon. This is Elena Mariani from Morgan Stanley. Thanks for taking my questions. My first one would be on your Ultraboost '19. Could you comment on the reception of these products at the beginning of this year? You've talked a lot about it, and I just wanted to know whether this is performing in line with your expectations in the different markets and particularly in Europe and in the U.S. My second question would be on Reebok, on the Reebok outlook embedded in your guidance for full year 2019. Would you expect the brand to return to growth, particularly in light of what you've just mentioned earlier in the call about exporting it? Thank you.
First question, UB19, it is performing according to our expectation. We are still in the ramp-up phase, but right now consumer feedback has been exceptionally positive for it. In many markets, in many colorways, we sold out. Right now, we're very happy with our introduction and also the consumer reception of UB19. Second question, Reebok guidance, we assume they will return to growth by 2019. That's the assumption, the plan. That is the assumption in our guidance. I do want to go back and just spend a second and say we put Muscle Up in place with a 2020 time range ahead of us. What we're looking upon is by 2020, to have a sustainable growth pattern and a sustainable profit pattern. That's how we're going to manage the business moving forward.
Which brings me to the closing of our call before I hand over to Sebastian. 2018 was a year that was a record year for adidas in all ways. We hit almost every mark except the top line, but above margin, above net income, above marketing spend, very strong e-com growth. It's a year that we were, in most cases, very happy with. We try to the best of our capability to be very transparent to you and tell you what we think goes well and not well. We hope that allows you to make a better decision. I hope also I set a signal up that we are transparent in what we're doing. We think 2019 will be a good year. We are not happy with the supply constraint that we have alluded to. That's why we put it on the table the way it is.
We are reconfirming our guidance for 2020. We believe that 2019 will be a solid year in our performance. It will be a back-ended year due to what we said, if you look upon our press release, that indicates growth of around 3%-4% in the first half, a sequential improvement. The biggest impact of the supply chain issue will be in North America in the first half. We want to make certain that you put that into the models that you have. I'm sure you have more questions, Sebastian, Harm, and I will, throughout the next weeks and months, be available for questions and answers for you, hope we give you more insight to most matters, but of course, not all matters. With this, I'd like to hand back to Sebastian.
Thanks very much, Kasper. Thanks very much also to Harm. This concludes our full year 2018 results conference call. Our next reporting date will be May 3rd for our Q1 results. Kasper said it, if you have any questions, you can either reach out to Adrian and myself, or you're going to meet us anyway during the next couple of weeks with our roadshow activities. With that, I would say have a great day. Talk soon. Bye-bye.