Good afternoon, ladies and gentlemen, and welcome to our Q3 2016 financial results conference call. Our presenters today are Kasper Rorsted, adidas Group CEO, and Robin Stalker, our CFO. I know that you've all been anxiously waiting to hear it from Kasper and Robin, of course. Before I will hand over to the two gentlemen, let me quickly remind you that, as always, all revenue-related figures that we will be discussing today will be discussed on a currency-neutral basis, that all figures will refer to our continuing activities and will be discussed excluding goodwill impairment losses. Now, without any further ado, I would like to hand it over to Kasper, please.
Thanks, Sebastian. Good afternoon to everybody. It's a pleasure to participate today in my first call as CEO to adidas. I think many of you have been following our company for many years and know it quite well. Some of you might know me also from my time at Henkel. I do look forward to my role as CEO of adidas, equally important, to get to know all of you over the next coming months and quarters. I started back in August and took over the CEO position in October. The numbers that we're discussing today was produced under the leadership of Herbert. I'd like to thank him and, of course, the entire team for producing what we think are very strong Q3 results.
I'm really excited to take over the lead of a company that is doing so well because it also gives me ample time to make sure that we can take the right decisions for the future. For me, I've always admired adidas from when I was a kid, when I was doing sport. Of course, being CEO of such a company is really a dream come true because I am dealing with products that I truly like and love. I'd like to thank our chairman, Igor Landau , the Supervisory Board for giving me the opportunity and the trust to become the new CEO following Herbert's many years' tenure at the company. What did I do the first couple of months? I really wanted to gain a holistic picture of the entire situation.
That's why I spent a lot of time traveling the world, meeting our key people, spending time in the key cities like New York, Shanghai, London, Moscow, Berlin, Boston, and Portland, to name a few. In all of those cities, I met employees, of course, partners of other kind. I met approximately 6,000 employees in one-to-one and one-to-many or town hall meetings. I spent extensive time with my board colleagues and senior management, not only here in Herzog, but across the globe where I visited adidas. I've also met our most important customers, be it Foot Locker in the U.S. or in Europe, INTERSPORT, Sports Direct, and Zalando, or in China, YY, and Belle, to name a few. I've also met our key sport marketing partners like FIFA, UEFA, MLS, NBA, and the German Football Association.
I saw a lot of suppliers very recently here in Herzog, a couple of weeks ago, I was in China and met up not only with our suppliers, but also our key customers. I'll continue my travel. Later this month, I'll go to Vietnam along with Glenn Bennett to meet our key manufacturers in Asia and then go back again to the U.S. What have been my key takeaways after the first three months with the group? I think that the group is in excellent shape. We are, in many ways, a role model in the industry when it comes to innovation, sustainability, and product operations. We have extremely passionate and committed employees, which I've never seen to this extent in any other industry. Our products resonate extremely well with consumers around the world, and we have a great momentum worldwide across all major markets and categories.
I think that's what you're seeing reflected in our third quarter numbers, but of course, also in our first nine months of this year. Our ongoing brand momentum has led to strong top and bottom-line improvements. Despite one-time costs, which we'll come back to, our underlying NII income will come out at the upper end of our guidance between EUR 975 million to EUR 1 billion. We expect that to come up at the upper end. 2016 will be a record year for the adidas Group. I think that the positive momentum proves really that the Creating the New strategy that was launched approximately two years ago is really paying off.
The consumer-centric approach has increased our brand desirability and relevance with the consumers, you can see that not only in our markets, not only in our revenue numbers, but also in the market share gains in the key categories and markets where we are active. We believe that Creating the New is delivering superior results. I want to be clear on this point because I know many of you will ask or has asked, we will continue to be fully committed to Creating the New, that has my full support. We'll focus further on execution and fine-tuning wherever and whenever we see that needed. I believe it's great to have had the opportunity to join a company when the company's in great shape. I want to be clear on this, like any other company, there are also areas that we can improve.
My job, along with the rest of the management, is to make this company even better, along with everybody, whether it's my management team and/or all employees globally. What are some of the initial priorities? First and foremost, of course, is to ensure that we continue a sustainable growth. We will make sure that we remain a growth company, at the same time, deliver significant top and bottom-line improvements. We need to win with the consumer with the most innovative products and also the most engaging experiences. We also, at the same time, need to manage our business in a physical manner to ensure sustainable success. One of my first priorities, continuing the long-term growth trajectory. Other priorities are drive the digital transformation within our organization and continue the turnaround in North America.
Let me start in spending just a couple of minutes on digital in North America. On digital, it is a great opportunity job game. Digital is changing our lives and businesses in almost all kinds of way, how consumers shop, how we communicate with them, how we design, develop, and manufacture a product, and of course, also how we communicate internally. adidas.com is our largest and fastest growing shop today globally. It's by the way, also the only global shop that we have. It's not about digital, it's not about what we want to become, it's how fast we can create competitive advantages through digital. I'll give you along with the rest of the management team, the details to our plan when we reconvene in March next year. The next part is to continue our U.S. turnaround. U.S. or North America is of key importance.
It is the single largest consumer market in the world, we've made major progress over the last 18 months, which is reflected in the 29% adidas growth in year-to-date 2016. I'd like to congratulate Eric Liedtke with an for winning the consumer. Winning in America is a marathon, not a sprint. We've had our set of challenges in the last 10 years, and while we've had a great run for the last 18 months, it's very important that we continue this momentum that we currently have in the U.S. To win in the long run, we need the best infrastructure set up in the U.S. For that reason, we have taken two very important decisions. Firstly, we've redefined our strategic setup in the U.S. and the role of our key locations.
Portland will remain our data tech quarter in the U.S. and the extension of our group headquarter here in Herzogenaurach. All other North America related functions will be hosted in Portland. Boston becomes a global home of Reebok in a new and vibrant location. Secondly, we've looked upon and assessed the situation of Reebok. Reebok is today well-positioned to become the best fitness brand, and we have transformed Reebok from a traditional sports brand to a purely fitness brand. We've made major progress, which is proven by consumer feedback and also continued top line growth in the last 14 quarters. At the same time, we have to be realistic. Reebok is growing slower than adidas and our competition, and we've seen no growth in North America in the past three years. Lastly, the profitability is significantly below the group average.
It's time to get back to the gym and redouble efforts on Reebok. What are we going to do? We'll be following our brand leadership principles that we apply to the rest of adidas. We'll be streamlining our Boston-based organization, we'll create a global brand team 100% dedicated to do only Reebok. To allow for a new beginning of Reebok, we will move to a new home in Boston in 2017. We've started the search for a new location, we've initiated the sales process for Canton Building that we've been in for many years. In addition, we will move most group functions and SLD to other group locations. Let me try to be specific on this. We have approximately 950 positions in our current Reebok headquarter. 650 of those will move to the new location.
150 of the remaining 300 will be relocated mostly to Portland in the U.S., and the remaining 150 positions will be eliminated. We will also accelerate the streamlining of our store network. We'll be reducing the number of Reebok U.S. factory outlets by half, and we'll limit the number of FitHub stores as the focus is on wholesale. Matt O'Toole will take full responsibility for Reebok in North America. We have and will assume one-time cost of approximately EUR 30 million in our second half, which is all including the numbers that we're speaking about. We'll give Reebok more freedom to operate globally and more responsibility in the U.S. We'll get a more focused organization, and that will enable us to continue the momentum we have right now of adidas in the U.S., and it will make Reebok stronger.
We are committed to accelerate growth and sustainable profit improvement. Reebok is an important member of our group, but it's clear, like in sports, every member has to contribute to the success, and that is also our expectation to Reebok. We'll be fully focused to ensure that that will take place. Now, let's move on to our golf business. We'll continue the divestiture process for TaylorMade, Adams, and Ashworth. It is strategically the right decision that's been taken, and we're fully committed, including myself, to execute that. It's best for the group to exit the golf equipment market. We expect an agreement by the end of 2016, and the divestiture is projected to trigger a loss of disposal. This will, however, not change our underlying profitability.
Looking upon 2017, of course, we'll give an in-depth briefing when we meet in March, but let me just give you a couple of comments. It's clear our plan is to continue a long-term growth path also in 2017. At the same time, we would not expect a similar level of revenue and profit growth as we compete against an exceptional year 2016 with 20% revenue growth and 40% profit growth. 2017 will be more in line with our long-term growth objectives that we also outlined on Creating the New with robust top line expansion, continued operating margin improvement, and also continue to drive bottom line improvements. We will, of course, also invest in our business where necessary in digital and infrastructure because these investments are necessary to elevate our long-term profitability. As outlined before, we'll give you full details of our 2017 guidance on March 8th.
We'll also host Investor Day on March 14 next year in Herzog, and more details around the evolution of Creating the New. In December, I'll be spending some time with you in New York and London and Frankfurt for our first informal get-together, which I very much look forward to. Rob will now take you through the numbers in detail, and then we'll have a Q&A session. Now over to you, Rob.
Great. Thanks very much, Kasper. Good afternoon, ladies and gentlemen. After hearing about our business from a more strategic point of view, let's move back to the fiscal year 2016 and discuss our Q3 figures in detail. As Kasper already mentioned, we can report another strong quarter in line with our expectations. Against the background of tougher comparisons following accelerating business development in last year's third quarter, group revenues yet again increased a firm 17%, adding up to EUR 5.4 billion. adidas continued its successful course from the previous quarters globally, increasing 20% in Q3 with double-digit growth rates across all regions, with the exception of Russia CIS, where sales grew at mid-single digit rates. Reebok was also able to maintain its top-line growth trajectory, showing another quarter of robust top-line expansion as revenues increased 7%.
The group's gross margin declined 90 basis points to 47.6%, following the predicted pressure from magnified currency headwinds, whereas operating margin declined a limited 20 basis points to 10.4%, supported by strong operating leverage. This adds up to an increase in underlying net income of 15% to EUR 387 million. As always, I will discuss all P&L items in more detail later in the presentation. Before that, let me share a little bit more color on the brands and categories driving our strong top-line development during the third quarter. Let's begin with our sport performance business, which continued its strong momentum from the previous quarters, delivering a revenue increase of 13% in Q3. This development was driven by double-digit increases in nearly all key categories, with running leading the way, growing 17% in Q3.
While running as a sport is certainly enjoying increasing popularity globally, our energetic performance is largely driven by our great running franchises. Not only has the newly introduced AlphaBOUNCE been very well received by consumers, especially in North America and China, equally important is that our various Boost franchises got an extra thrust from the introduction of the UltraBOOST Uncaged and the Colored BOOST. Furthermore, our much stronger focus on women, underpinned by the successful introduction of the PureBOOST X earlier this year, is driving an accelerated rate of sales in the women's business. While the training category sustained its double-digit growth trajectory with sales up 13% in Q3, revenue growth in the football category, up 5% in the quarter, was somewhat more moderate.
This development, however, was expected as it was solely due to a strong base effect from last year's Q3, where we not only launched the jerseys of one, but of two major teams in global football, namely Manchester United and Juventus Turin. As a result, football apparel sales were down year-over-year. At the same time, footwear sales increased a strong 27%, supported by the launch of the Speed of Light Pack in July, confirming our underlying momentum in this important category. Let's move over to our lifestyle business, where we recorded our sixth consecutive quarter of over 30% growth. Revenues in the third quarter increased 42%, driven by both adidas Originals, up 41%, as well as adidas NEO, up 51%. At adidas Originals, we continued to record amazing growth rates in the footwear business, up almost 50% in the third quarter.
This, by the way, is on top of a 47% increase in Originals footwear sales in last year's third quarter, which I believe speaks for the sustainability of this growth trend. While our iconic silhouettes such as the Stan Smith and the Superstar remain popular around the globe, the Tubular is gaining more and more traction with consumers, especially in the U.S. and China. We continue to see incredible hype around our NMD franchise, which we launched at the beginning of the year. Not to forget our unique collaboration with Kanye West, where Q3 has seen the expansion of our Yeezy franchise into the world of competitive sports as we launched the first cleated football boots designed by Kanye.
The success around the shoe launch was once again overwhelming as it has been the fastest-selling football cleat in adidas history, being sold out in hours or even minutes at Eastbay. Ladies and gentlemen, this is the perfect example of the indistinct boundaries between sports performance and lifestyle. This example leaves no doubt that adidas is the brand with the ultimate dedication to sport on and off the field of play. Reebok, as you heard from Kasper, remains a key priority for us. Revenues in Q3 increased 7%, driven by growth in all market segments. While it's indeed promising, we are expecting more from Reebok, both in terms of revenues and in terms of Reebok's contribution to our bottom line. As for brand adidas, the U.S. plays an important role here also for Reebok.
An efficient and effective distribution will be key to the Reebok brand's future success in this all-important market. We are, therefore, accelerating our initiatives to streamline Reebok's store base in the market. By the end of the year, we will have closed another 20 factory outlets and almost half of our Reebok FitHub concept stores. We will see an even higher number of store closures in 2017. As Kasper mentioned, the initial costs of around EUR 10 million are already reflected in our third quarter results. To conclude on the brands and categories, let's have a quick look at TaylorMade-adidas Golf, which continued its top-line recovery in the third quarter, growing 6%, driven by robust 13% growth at TaylorMade and a 6% increase at adidas Golf. At TaylorMade, growth was supported by ongoing strong sell-through rates of the M series metalwoods and iron product categories.
TaylorMade continues to dominate the metalwood category, strengthening its market leadership position through further market share gains globally and notably in the U.K., one of the world's biggest golf markets. As you can see, ladies and gentlemen, the turnaround program we commenced in the second half of 2015 for TaylorMade continues to be very successful with the result that our golf business is in much better shape today than it was the case a year ago. Let's now have a look at our market segment performance. In the third quarter, we were once again able to grow revenues at a double-digit rate in each market, the exception being Russia CIS, which nevertheless also accelerated its growth momentum for the third consecutive quarter, growing 7% in Q3.
Of particular note, in our core markets of Greater China, North America, and Western Europe, where revenues grew 25%, 20%, and 15% respectively, we continue to outgrow our most important competitors. This, ladies and gentlemen, is following an already significantly accelerated third quarter performance in the previous year. Let's move on from the big picture and dip into some of our market segments in more detail. Beginning with Western Europe, where we were able to grow our top line by 15% in the third quarter, as already mentioned. Keep in mind that this is on top of an almost 20% increase in Q3 2015, which means that over a two-year period, we've increased our business by one-third in a more or less mature market environment. adidas revenues grew 15%, driven by double-digit increases at adidas Originals and adidas NEO.
Despite the missing initial jersey sales from ManU and Juve last year, our football category was able to grow by another 9% in Q3. This reflects a strong double-digit growth in footwear and shows that adidas is the winner of this year's major football events. Beyond football, mid-single-digit growth in the running and training categories also contributed to the overall improvement at adidas. Reebok revenues also increased 15% in Q3 due to double-digit sales growth in the training category, as well as in classics. From a market perspective, the main contributors to the sales development were the U.K., Germany, France, Italy, Spain, and Poland, where revenues grew at double-digit rates each. As pressure from negative currency effects intensified, as anticipated during the third quarter, gross margin in Western Europe saw a decline of 4.1 percentage points to 43.4%.
We were again able to partly offset the negative effect from the gross margin decline through operating leverage of 0.9 percentage points, therefore limiting the decrease in operating margin to 3.2 percentage points and ending the quarter with a robust segmental operating margin of 21.4%. Moving over to North America, where we maintained our strong double-digit growth momentum, increasing revenues by another 20% in Q3. While the most encouraging development is and remains the fact that brand adidas is resonating better and better with the U.S. consumer, I do not want to leave unmentioned that Reebok, for the first time since 2013, positively contributed to the market's growth. Let's dig into the brand's development in more detail.
Starting with adidas, which was not only the strongest-selling brand during the back-to-school season this year, materializing in strong double-digit growth at adidas Originals and adidas NEO, but it further gained significant traction with U.S. athletes and sports fans. Our U.S. sports business increased a phenomenal 30% in Q3. Supported by strong growth in our running and training categories, our sports performance revenues grew at a double-digit rate in the third quarter. All of this has helped us to increase our market share in the all-important footwear category from 5% a year ago to 10% in September 2016. This, ladies and gentlemen, makes me extremely proud of what we have achieved within the last one and a half years since the kickoff of Creating the New. This can only be the beginning.
As Kasper has just recently said, the turnaround in the U.S. is a marathon and not a sprint. Over to Reebok, which, as I've already mentioned, was able to grow its business in North America for the first time since 2013. Revenues in the third quarter increased 2%, reflecting improvements in the brand's wholesale business, both with long-standing customers such as DICK'S and Academy, and also with new partners like Champs, Macy's, or Journeys. The strong revenue growth in North America led to significant operating leverage in the third quarter. Combined with a gross margin increase of 10 basis points, the market's operating profit improved by 70 basis points to 7.7%. In Greater China, Q3, with its 25% revenue growth, marked the 10th consecutive quarter of double-digit growth.
I can once again confirm that we do not see any weakening in the market. The strong structural trend towards a healthier lifestyle, as well as sports-inspired leisure products, is still absolutely intact. Inventories in the market are clean, and the cooperation with our business partners continues to be highly successful. A close look at the drivers from a category perspective will definitely further underline my statement. adidas revenues grew 25% due to strong double-digit growth in the running, training, and football categories, as well as at adidas Originals and adidas NEO. With growth of 40%, the running category is the strongest performer in the quarter, illustrating the big running trend in China, as well as the Chinese consumer's confidence in our product and in our brand. Reebok revenues increased 19%, driven by strong double-digit growth in the training category.
In addition, mid-single-digit growth in the running category, as well as in classics, contributed to this development. The ongoing strength of our brands can also be witnessed in the further acceleration in gross margin expansion in the third quarter. Gross margin in the market segment increased 1.5 percentage points to 56.8%, while operating margin grew two percentage points to 34.6%, supported by further operating leverage of half a percentage point. As if the great financial development isn't enough already, I can also announce another tremendous milestone for Greater China as we just opened our 10,000th mono-branded franchise store a few days ago. There is no doubt that we are continuing to expand our footprint in the marketplace, and we are moving at full speed towards reaching our 2020 targets, both financially and operationally.
Moving over to Latin America, where revenue growth returned into double-digit territory following a somewhat distorted sales performance within the first half of the year, largely due to timing shifts. Strong double-digit growth in the region's biggest market, Argentina, as well as further improvements in brand desirability in Brazil, supported by our successful brand activation activities around the Rio Olympic Games, contributed to this development. Consequently, as we assured you during our Quarter 2 call, revenues returned to double-digit growth and increased 16%, driven by broad-based growth in major sport performance and lifestyle categories. While adidas revenues increased 18%, driven by double-digit sales growth in the running and training categories as well as at adidas Originals and adidas NEO, Reebok revenues were up 4% due to double-digit growth in the training categories as well as in classics.
From a market perspective, the main contributors to the increase were double-digit improvements in Argentina, Peru, and Colombia, as well as high single-digit growth in Mexico and Chile. While the gross margin remained under severe pressure from currency headwinds, declining 3.9 percentage points to 40.1% in Q3, the strong top-line growth led to significant operating leverage, resulting in overall operating margin expansion of 2.0 percentage points to 14.6%. Let me close the discussion on our operating segments with a quick look at other businesses, where we saw significant top and bottom-line improvements in Q3. Revenues grew 7% in the third quarter, driven by a 27% increase at other centrally managed businesses, following double-digit sales growth of most sub-brands, in particular Y-3, as well as a 6% increase at TaylorMade-adidas Golf, as already discussed earlier.
At CCM Hockey, the overall challenging market conditions in the U.S. hockey market continued to weigh on the brand's performance during the quarter, as reflected in declines in the licensed apparel and equipment business. Consequently, revenues at CCM Hockey were down 7% in the third quarter. However, a strong expansion in gross margin by 3.4 percentage points to 37.8%, supported by higher product margins at TaylorMade-adidas Golf, as well as a decline in operating expenses as a percentage of sales by 5.5 percentage points, led to a significant improvement in segmental operating profit. At 2.2%, the segmental operating margin grew 8.9 percentage points compared to the prior year period. Let me turn to the major P&L items of the adidas Group and start with the group's gross margin, which is for sure a topic of particular interest to all of us.
As expected and communicated throughout the year, the group's gross margin saw the expected decline during the third quarter, down 0.9 percentage points to 47.6%. This decline was solely the result of significantly stronger currency headwinds in Q3 compared to the first two quarters of the year. When directly comparing the gross margin drivers of the first half of 2016 with those of the third quarter, the reason becomes very obvious. While negative currency effects added up to 380 basis points for the first half of 2016, the third quarter alone experienced a significantly higher negative FX effect on the group's gross margin. In total, 490 basis points. In contrast to this, the underlying improvement from our various mitigation initiatives, including a more favorable pricing, product, and channel mix, continued with almost identical strength in Q3 compared to the first half of 2016.
This clearly underlines the ongoing strength of our brands. Ladies and gentlemen, let me make it very clear that this 90-basis points decline during the third quarter, A, did not come as a surprise to us, as we were expecting this since the beginning of the year, as reflected in our full-year guidance. B, it is simply due to the more severe FX hedging and headwinds. Looking at the gross margin development for the first nine months, the group's gross margin remained fairly stable at 48.6%, a great achievement in light of the overall FX environment we are facing, and as I've just explained. Let's move further down the P&L and continue with other operating expenses, which increased 12% both in Q3 and year-to-date.
As mentioned before, during the third quarter, we initiated restructuring measures at Reebok, which had an impact on our group's operating expenses around EUR 10 million in Q3. In addition, our Q3 results reflect a negative impact from the Golfsmith/Golf Town bankruptcy in a low double-digit million EUR range. In spite of these one-off expenses, the group was still able to generate robust operating leverage and as other operating expenses as a percentage of sales decreased 0.8 percentage points to 38.0% in Q3 and to 40.5% in the first nine months. The operating margin decline in Q3 was limited to 0.2 percentage points, translating into a strong 10.4% operating margin or EUR 563 million operating profit in the quarter. This adds up to an operating profit of EUR 1.5 billion in the first nine months, or an increase of 1.4 percentage points to an operating margin of 10.0%.
Net financial expenses increased from EUR 10 million last year to EUR 18 million in the third quarter of 2016, net financial expenses for the first nine months declined slightly to EUR 60 million compared to EUR 19 million in the prior year period. Following a 2.8 percentage points lower effective tax rate in Q3 or 2.6 percentage points in the first nine months, our net income from continuing operations increased a strong 15% to EUR 387 million in the third quarter, adding up to a 39% increase to EUR 1.028 billion for the first nine months. Diluted earnings per share from continuing operations amounted to EUR 1.88 in the third quarter, reaching EUR 5.01 in the first nine months of 2016, representing an improvement of 13% in Q3 and 38% for the first nine months.
Let's have a look at the most relevant items of the group's balance sheet. As always, starting with operating working capital. With inventories growing 18% on a currency-neutral basis, supporting our revenue growth expectations going forward, accounts payables grew 15% currency neutral, reflecting the increase in inventories. Accounts receivable were up nine percent on a currency neutral basis. Average operating working capital decreased 0.4 percentage points to 20.3% as a percentage of sales. I think you'll agree that this is a great evidence of sustainable and healthy growth. Net borrowing at the end of September amounted to EUR 769 million, representing a decrease of EUR 134 million compared to the prior year. This development was driven by an increase in cash generated from operating activities. Our ratio of net debt to EBITDA also decreased from 0.6 times in 2015 to 0.4 times in 2016.
Last but not least, our equity ratio remains at a strong level of 43.0%. This, ladies and gentlemen, now concludes the review of the financial developments for the third quarter and for the first nine months. Let's now take a look at the remainder of the year, starting with a brief overview of what you can expect from us operationally in the upcoming . Thank you. Let me start with our global brand campaign, Sport 16, which represents a massive shift since the beginning of the year in how adidas communicates with our customers and our consumers. Driven by the brand's mission to be the best sports brand, the campaign has since then strengthened adidas' position within the creator community, celebrating athletes who embrace creativity on and off the field of play.
Football Needs Creators is the latest chapter of the adidas Sport 16 campaign that builds upon the belief that all athletes are here to create. The new spot follows the recent launch of Sport Needs Creators, featuring athletes such as the world's most in-demand football player, Paul Pogba, Super Bowl 50 MVP Von Miller of the Denver Broncos, two-time NFL MVP Aaron Rodgers of the Green Bay Packers, or four-time NBA All-Star James Harden of the Houston Rockets. Talking about Paul Pogba, Man U's star midfielder also takes center stage when it comes to promoting our newest football footwear release, the Stellar Pack. Together with some of the world's most influential football players, including Gareth Bale, Luis Suárez, and Mesut Özil, he will ensure that our newest football boots continue to enjoy broad attention and on-pitch presence in the months to come.
With the Mercury and Speed of Light packs, we continue the successful journey which started earlier in the year with the release. Turning to running, where we are determined to drive and strengthen our momentum in the months to come. We have every confidence that our consistent focus on key footwear franchises, together with their strategic positioning, brings us closer to the running consumer than ever before. Our key running silhouettes allow us to service different types of consumer with different preferences at different price points. While our Cloudfoam and AlphaBOUNCE silhouettes target the more price-sensitive consumers, we have our Energy Boost and Pure Boost franchises addressing performance-orientated runners on a more premium level.
At the very top, as you know, we have our Ultraboost models for the professional runner, featuring an excellent combination of comfort and support, as well as the latest fashion trends. Our franchise strategy, together with our marketing initiatives, tailored to the profiles and needs of consumers, allows us to continuously fuel demand around our running shoes. In this regard, we have recently launched the reflective pack around our Ultraboost and UltraBOOST Uncaged franchises. The pack, which features reflective yarn in an all-white design, will ensure we keep the excitement up during the winter season. This is just the beginning, as Q4 will see further exciting innovations in the running category, such as the first commercial footwear product launched by adidas and Parley for the Oceans.
This brings me to our next category, training, where we have also just recently launched a completely new and exciting product offer, adidas Athletics, which addresses the crucial period pre- and post-competition. The highlight product of this newly created product line is our Z.N.E. hoodie, a fresh take on traditional pre-game outwear, using unique design elements, making it a very recognizable silhouette that we can build on in the future. Athletics apparel will be a key driver for the training category in Q4 and indeed beyond. The recent launch was supported by key assets such as Gareth Bale, James Harden, and Caroline Wozniacki, as a far-reaching digital campaign also including outstanding activations across our most important key accounts and retail stores. First sell-through rates are highly promising.
Turning to basketball, where we are proud to present the first James Harden signature shoe, the Harden Vol. 1, paying homage to where James' champion journey began back in 2007. The shoe marks the beginning of a co-created footwear and apparel signature line from adidas and James Harden, reflecting our strategic open-source approach. The shoe will be supported by our biggest basketball campaign in the past two years, activating all key consumer touch points, including a TV campaign and further media activations in the U.S. and China from November onwards. Additionally, there will be an extensive retail introduction in 2,500 stores globally, starting in some of our key cities in December.
On the lifestyle side, we will continue to pursue and accelerate our footwear franchise strategy, putting a special focus on building and investing into the various footwear franchises, starting with our iconic silhouette from the past, such as our well-known Superstar and Stan Smith, through to newly created modern franchises such as the NMD or the Tubular. A broader, more diverse footwear franchise portfolio will support our growth ambitions in lifestyle, while at the same time helping us diversify our portfolio through ever-changing fashion trends. As you know, during Q3, we brought back the iconic Gazelle franchise, thus reintroducing another member of our footwear family, while in the months to come, we will be launching exciting products for our Tubular and NMD franchises. Q4 will also see our first global endeavor behind our EQT franchise in the buildup to the Christmas season.
Let me now turn to Reebok, where we have exciting brand and product initiatives upcoming, aimed at further strengthening and positioning Reebok as the leading fitness brand in the global fitness market. Only a few weeks back, Reebok joined forces with Australian fitness professional Emily Skye as its newly global fitness ambassador, as well as with global style icon Gigi Hadid, both of them brings along an impressive social media footprint, with Gigi Hadid having over 24 million followers on Instagram. Both partnerships aim at engaging and motivating women around the world to unlock their potential through fitness. Reebok will have Gigi Hadid telling the next phase of the brand's Be More Human campaign, asking women around the world to celebrate the beauty of imperfection and promoting Reebok's message of self-betterment.
On the product side, similar to the adidas brand, Reebok is also making further strides when it comes to the future of manufacturing. Only a few days ago, Reebok presented a groundbreaking manufacturing innovation, the Liquid Factory, which has the potential to fundamentally change the process and speed of footwear creation in the future. This new manufacturing process uses software and robotics to literally draw shoes in three dimensions. A proprietary liquid material created especially for Reebok by BASF is used to draw shoe componentry in three-dimensional layers, creating totally unique footwear without the use of traditional molds. With great media coverage, Reebok just presented the first concept shoe emerging from the Liquid Factory, creating hype for the brand and its pioneering innovation with great potential for the global fitness market. This, ladies and gentlemen, brings me to the last big and exciting announcement that I have for you.
While all of you are familiar with our strategic aspirations for 2020 and our focus on key cities, with New York being one of them, I am happy to announce the upcoming opening of our new adidas flagship at the heart of Fifth Avenue on December 1st. Without doubt, this store will set new benchmarks with regard to consumer focus and brand experience. Our New York flagship will redefine sport at the point of sale, and we have set ourselves the ambition to create the best brand experience on the most frequented shopping street in the world. Make sure you have a look at it next time you are in New York, but bring some time, as you have to explore 4,235 sq m, making it the biggest physical adidas store ever. Concluding our Q3 results call, let me quickly elaborate on our financial outlook for 2016.
Against the background of the outstanding financial performance in the first nine months of 2016, we confirm our financial outlook for the full year. We continue to expect revenues to increase at a rate in the high teens on a currency-neutral basis for the full year, with healthy double-digit growth in Q4 as well. The gross margin is projected to be at a level between 48.0%-48.3%. Despite investments set to spur our Creating the New strategic business plan, as well as during the second half, one-time costs for Reebok and the TaylorMade-adidas Golf in a magnitude more than EUR 40 million, we continue to project the operating margin for the adidas Group to increase to a level of up to 7.5% in 2016.
We confirm our guidance for net income, which we now expect to come in at the upper end of the target range of between EUR 975 million and EUR 1 billion. That is all in spite of the additional charges Kasper and I have explained to you before. Before we take your questions, let me conclude my comments by saying we are more than satisfied with the achievements of the group in the first nine months of this year. Despite running against more significant comps and in spite of the severe FX headwinds, we have managed to sustainably grow the group's revenues and profitability. Without giving any detailed guidance for the next financial year, today's results make it clear that the adidas Group remains a growth company. With that, ladies and gentlemen, both Kasper and I will be happy now to take your questions.
Thank you very much, sir. Ladies and gentlemen, if you would like to ask a question today, please press star one on your telephone keypad. If you find that your question has already been answered, you may remove yourself by pressing star two. Again, please press star one to ask a question, and we will take our first question from Fred Speirs from UBS. Please go ahead, sir. Your line is open.
Hi, gentlemen. Three questions, please. Kasper, hello. It sounds like you've been off to quite a busy start. I'd be very interested to hear your early assessment of how well the reporting lines are optimized for speed and efficiency of decision-making, and also whether you think the operating structure will need to evolve much to help you execute on the fast transformation within digital. My second question was on Reebok. You've talked about moving to a pure fitness brand that's more wholesale-focused. It does seem that perhaps the brand has not successfully appealed to a wide enough consumer base yet, especially in the U.S. Where do you see the main opportunities for Reebok? Are those more focusing on brand, on product, or on distribution? Also, are you thinking about shifting how you think about the target consumer? The last one was on Boost.
You've got a great platform there, which is clearly performing very strongly. What are your latest views on the potential of Boost? Could you talk perhaps about the levels of overall volumes of Boost shoes you're hoping to ship in 2017, and how that compares to 2016? I think the last disclosure I remember was 12 million volumes in 2015. Thank you.
Thank you for your questions. Some I'll answer quite directly, and some I will not. Of course, I'm looking upon the overall operating model within our organization, and as our business evolves over time, including the digital transformation, I think it would be necessary to create a greater level of clarity. When we get there, we'll make the appropriate announcements. Clearly, any company in transformation will also have to evolve its organization over time. We're not dogmatic about it. At this stage, I don't want to go to a further level of detail. I'll be happy to when we come to the March meeting to outline any kind of changes that might occur in our organization. When it comes to the transformation of Reebok into a fitness brand, I think we've gone through an evolution over time.
Let me try to just illustrate what I mean. For a given period of time, the brand was probably stronger than the products. Right now, I would argue our products are stronger than the brand, and we need to make sure that we reconnect our consumers with the brand that we have. We've been able to do that outside the U.S. quite successfully, which you've seen at least in the growth side. When you look upon what is really at the top of the agenda in the U.S., one is, of course, reigniting the brand through a number of initiatives, and Robin alluded to those, and get a better quality distribution than we've had in the past, which is what you've seen in some of the changes we announced by reducing the factory outlets.
Getting the top line up to where it needs to be, particularly in the U.S., and clearly also getting the consumer to pay more for the product so we start getting acceptable margin that we are not experienced today. That would be my current assessment of Reebok's position. Again, as I have said before, every member of a family or a team needs to contribute, and that is the assumption for being part of the team. Rob, do you want to take the last one? Fred, your third question about Boost, you will appreciate we are not giving any guidance at the moment for 2017. That includes any numbers for some of our franchises. I can reconfirm the EUR 12 million that you have quoted for expectations of Boost sales in 2016.
Sorry, just to double-check. I thought it was EUR 12 million in 2015. Was 2015 a lower number then?
13. EUR 13 million. Sorry, EUR 13 million.
Thank you.
Thank you. Our next question will come from Andreas Inderst from Macquarie. Please go ahead. Your line is open.
Yeah. Welcome, Kasper. Good to have you on board. My first question is on Reebok. You quantified the one-offs. Can you also quantify the benefits of these measures and where they are actually booked? Are they booked in the North American region? In this respect, in case the turnaround cannot be achieved, what then? Can you rule out a disposal of Reebok in the medium term, or what's the worst-case scenario here? That's my first question. The second one, there's a lot of talk about your motivation and incentives to join adidas, at least within the financial community. Could you please provide some background here on your incentives? What is actually your first take on the sports industry? What do you find odd, interesting, and exciting in the sports industry and at adidas? My third question is addressed to Robin, because Robin made this comment.
In terms of market shares, you reached now 10% in the North American market. That's a good achievement, far away from the rest of the world. You clearly highlighted this is just the beginning. Can you elaborate on that, please, Robin? What could be a reasonable midterm target for the U.S. market? Thank you.
I will start with the first question, which is Reebok, and Robin will allude to where it's booked. In any kind of company, everybody needs to make their contribution. If not, they can't be part of that company. I think that is as clear as I can answer that question. There is no point in speculating, but it's clear that PacSun is not going to be around forever, that goes for every country, every category, and every brand. I believe that we will be very consequent when it comes to that. That is not, by any means, saying that we're selling Reebok. We're saying we put a plan in place, we execute that plan, and should something different come out, we'll deal with that scenario when we get there. My motivation for joining adidas is morefold. First of all, I love sport.
Secondly, adidas has been my sports brand since I grew up. Joining a company which is a sports company and the brand that I've used all my life was a purely emotional driven decision, and I've been extremely happy in the first 90 days I've been here. If you look upon my first initial observations, it's probably an industry that is much more growth-driven than I'm used to, but it's also an industry that might be less structured than I'm used to. I think these are two observations that I have, and I think the big challenge is going to be how to maintain the growth and get structure, because that's where a lot of the upside will lie for the company. These were the primary drivers.
I really wanted, very emotionally driven, to join this company because I think it's a great company, and I see my responsibility as CEO to, along with the rest of the management team, to make this company better. I truly believe we can do that jointly, and that's why I joined the company.
Andreas, two points. One on the Reebok we booked in the third quarter related to shop closes, about EUR 10 million. That's in the North American region. They're still coming, obviously, in the fourth quarter, which I've alluded to, about EUR 20 million for the restructuring that Kasper was talking about a few minutes ago. Second question about market share in America. Well, I'm not, and I'm sure you're not expecting me to quote a goal for market share. The more, the better. I've always said that there wasn't really a market around the world where adidas had a market share of under 15%. That's a personal view, but I still think something close to that has to be a pretty good, realistic first goal for us. We'll give you more about our specific goals, surely, when we update the communication to you in March next year.
Good. I'm looking forward to that. Thank you.
You're welcome.
Thank you, gentlemen. Our next question comes from John Guy from MainFirst. Please go ahead, sir.
Yes, sir. Good afternoon, gentlemen, and welcome. Good luck, Kasper. My first question with regards to gross margin by distribution channel. Backing out the third quarter gross margin, Robin, it looks like retail wholesale gross margin was down around 150 basis points with other businesses up around 320 basis points. Within that annual initial conversations around the pure FX impact, is it fair to say that retail wholesale deterioration quarter on quarter is again just driven by currency use or no incremental promotional activity in the North American market? A lot of commentators have been talking about, a lot of brands have been talking about a little bit more promotional pressure going into the third quarter. That's my first question. My second question is around working capital. We've seen the inventory increase by about 18% on a constant currency basis in the third quarter.
Your receivables up 9%, payables up 15%. Great cash generation over the quarter. What can we expect in the fourth quarter? I appreciate it's a small quarter, but should we be looking at average working capital as a percentage of sales roughly in line with what we've seen so far over the nine months? Kasper, just a question for you in terms of sporting goods industry and overview. You've been very busy over the last 90 days. How do you view the marketplace in 2017? I think with regards to some of the strategic positioning that we've seen around volume and value. Certainly, there's been a lot of price mix increases that have been pushed into the market to try and offset some of the FX and labor costs.
As the FX impact dissipates going into 2017, do you think the market will be more of a volume-driven market over a value emphasis in 2017? If you could maybe give us any views around gross margin expectations for 2017, although I'm probably pushing that. Thank you.
John, let me take the first two questions. Look, you're talking about hedging effects in our gross margin. I can confirm very clearly that the only reason we have this significant negative element on the gross margin is simply because of the hedging. I mean, the purchasing of our products in dollars, you know, we said we had a hedge rate last year of something around about 131, 132. For this season, we're at 112. That's a significant difference. That was the reason why I was guiding in the last year, beginning of this year even, to the gross margin for the full year being down as much as one percentage point. That we've been able to mitigate a lot of that in the first half of the year, I think that's really positive. We're still very positive.
If you look at the graph we showed on the Webex with the development of those, the product mix and price increases, around about 400 basis points being able to compensate for this. There's definitely nothing in here that relates to any sort of promotional activities or heavy discount or anything like that. It is pure hedging. I've just repeated the guidance for the full year for the gross margin, 48.0% to 48.3%. That should give you some confidence. We're feeling reasonably well with the fourth quarter and what we're seeing on that. Your second question was about operating working capital. You know, we've spoken about a lot of times, we keep a very close eye on inventory. I can confirm here that the inventory development is, it's very current. We're in line with business expectations to a large extent here.
Our operating working capital as a percentage of net sales is a good 20.3%. It's actually improved 40 basis points over the prior year. I expect, even though the fourth quarter's pretty small, nothing significant in the change in net operating working capital development. That's all I can say about that at this stage.
To your last question, forgive me, I've been in the company for 90 days now and CEO for 33. I like to make sure that I give good and content-rich answers when I get asked. I'll be happy to answer the question when we meet in March, but I think that would be the appropriate time, simply because I want to make certain it's well-founded, the answer.
Of course, I've spent quite a lot of time in the first 90 days really getting insight into the industry and most of all, into our company, which I also think I'm getting. I would ask you for the patience, and then I'll be happy to give you an elaborate answer when we meet or either in person or virtual in March.
That sounds good. Thanks very much, Kasper. Good luck.
Thank you. Our next question comes from Antoine Bellefroid from HSBC. Please go ahead. Your line is open, sir.
Hi, it's Antoine Bellefroid at HSBC. Three question, if I may. First of all, regarding Reebok that you identified as being one of your priorities. It's been a while since we haven't had any idea of the operating margin at Reebok. Is it a brand that is now loss-making? Or at least what we know is that it's below the EBIT margin of adidas. What would be the sort of main structural difference, maybe first of all, in terms of gross margin and then in terms of operating cost and the initiatives that you've just announced, how do you think that they are going to solve a part of that, or at least narrow the gap with adidas? My second question is on the U.S., which is also a big priority for you.
Another 2020 plan, there is actually, I think in year one and year two, a big sort of step up in advertising, then even in the U.S., there should be some leverage on advertising. Do you think that this has to be put under review? If maybe you want to, you think that there is more advertising needed to support the U.S. market? Finally, a more sort of broader question about, especially, you're coming from a different industry but still, partly at least, involved directly with the consumer. Have you identified some easy wins or maybe an area where the sporting goods industry, not to mention adidas, would be, I don't know, a bit lagging behind other consumer type of companies? Thank you.
Let me just start on the commitment we made to the U.S. It was not a two-year commitment, it was a three-year commitment. We're entering into the third year, and I think you can see the progress that we've made in the last particularly 18 months. It's important that we continue to make a sustainable progress around the adidas brand in the U.S. because not only do we need a bigger market share position, which Robin alluded to, but of course, we need a greater contribution on the bottom line, and that will come through scale. You should expect to see the same kind of activities as in 2016 continuing in 2017, as we already indicated. What comes after 2017, we'll say at the appropriate moment of time.
On the Reebok side, I'll hand over to Robin, let me just answer the last question you asked about what are some of the easy wins or not easy wins. I think if you were to look upon the two main differences between the consumer goods industry I come from and the sporting goods consumer industry, if you were to call it that. The sporting goods is a high growth industry, which is important that we continue to focus on maintaining a sustainable high growth also in the future.
The consumer goods industry I come from is a lower growth industry, which has been run very disciplined. A lot of the earnings you've gotten, you have gotten out of getting through gearing of the organization and gearing through the entire business model, also through leverage. Of course, you can put one and one together and say, the challenge we have is how are we going to make certain we maintain a very strong top line, which we've seen, and we expect also for next year, while looking upon gearing in the model and combining the two, and that would be my observation of it. I don't think in any business there's any easy wins. If they're easy wins and they wouldn't have been taken by management, they shouldn't have been there.
I think that's why there are no easy wins, but it doesn't mean that there are no room for improvement. I will repeat what I've said in the last eight years in my previous job, I think there are improvements to be done in every single company, it's identifying those improvements and then execute them very diligently, which is also going to be the case in adidas. Antoine, your first question was going in the direction of, can we talk about profitability? Well, you know, since the joint operating model, we don't have anything to share on profitability of the Reebok or the adidas brand other than comparing the gross margin.
If you look at the gross margin, we're still very much in a situation where although there were some quarters where Reebok improved its gross margin, we still have a deficit to the adidas brand of somewhere between 8-9 percentage points. That's an area where I think the efforts as Kasper's talking about and having the focus more on what they can do with Reebok, making it the best fitness brand in the world, that we should be able to see improving as we get product with higher price points that can sell through better and generate better gross margin than the rest, will be also generating then further contribution to the group.
Let me just follow up on Reebok. The EUR 30 million that you're taking for 2016, how confident are you that it is going to be enough or should we maybe expect some other restructuring charges that you could announce during the Investor Day in March?
No, that is definitely not our expectation, Antoine. Th ese costs are related to exactly what our plan is now to strengthen Reebok and its positioning, getting them into a dedicated office in Reebok and doing the changes in personnel headcount as Kasper mentioned in his opening remarks. Nothing else expected.
Thank you.
You're welcome.
Thank you. Our next question comes from Jürgen Kolb from Cheuvreux. Please go ahead. Your line is open.
That was close enough. Thank you very much. Welcome, Kasper, to the company, to the industry, and to these conference calls. On Reebok, two questions on Reebok. First of all, you mentioned that the team wants to strengthen the wholesale business. If you could just give us an indication how the breakdown of the distribution of Reebok is currently in the U.S. in terms of mall-based retailing, full-line sporting goods, or other distribution areas, and where you plan to grow that business again. Secondly, the joint operating model seems to have been broken up now in the U.S., and I was trying to understand as to why that is. I know it's not growing in the U.S., but what can you do different when you break up this joint operating model in the U.S. as compared to all other regions where this model is still working?
Lastly, maybe just as a teaser in terms of the digital that you put a focus on, where do you think the company needs some shot in the arm, or where do you think you have the biggest necessity to work on and to improve the digital side of the company? Thank you.
Let me just start with the joint operating model. As you rightly said, that we have disbanded the joint operating model in the U.S. I think going back and understanding our position in the U.S. and outside the U.S. is fundamental for this. Robin Stalker spoke about it actually during his part where he said in almost every country in the world, we have a 15%-plus market share. That means outside the U.S., we have traditionally been extremely strong in adidas, and that has helped Reebok fundamentally in becoming successful, which is why you've seen 14 quarters of growth outside the U.S. In the U.S., as you know, we have traditionally had a challenging position, and only in the last 18 months have we really moved sustainably forward.
That meant that we've had a challenged adidas business and at the same time, a challenged Reebok business. Putting two challenged businesses together is normally not a good thing. Now we are in the position where adidas is really making great strides in the U.S., and we want to make certain on one side that the adidas management does not get distracted and get full attention on continuing the journey we are right now on. At the same time, also for Reebok, that they get completely focused on only doing Reebok. I'm convinced that in the U.S., this is the right operating model because we started from a very, very different origin in the U.S. than we did in the other regions. You can then say, maybe we should have done before. I find that's completely irrelevant.
We're taking the decision we now believe is the right one, I can tell you we have a very, very well-articulated plan in place that we'll execute upon, the management team will review this plan on a regular, ongoing basis, driven by Eric Liedtke, of course, also Robin Stalker and I, and ensure that everything that we have set ourselves out to do, we will do. On the digital journey, I'll be more than happy to give you a lot of information in March. I think that would be the good way of answering that. Maybe the teaser has to then last until March, I think there is plenty of opportunity for us. I'll be spending here despite the fact that we are doing a good job.
Jürgen, you asked about the split between wholesale and direct consumer for Reebok. In the States, it's 60% wholesale, 40% DTC.
Okay. Very good. Just maybe a follow-up for you, Robin. The current hedge rate you have in your books for 2017, currently, roughly?
Around the 111.
111. Wonderful. Very good. Thank you so much.
You're welcome.
Thank you. Our next question comes from Adrian Rott from Deutsche Bank. Please go ahead. Your line is open.
Hi, everyone. Welcome, Kasper. I've got two quick follow-ups. Firstly, on gross margin trends in the quarter. Can you give a few comments on full price share and category mix effect for adidas and Reebok, if any? Because if I look at North America, for example, and we've touched upon that before with the gross margin up 10 basis points following very strong improvements in the first half. I was just wondering whether you can provide some more color on what's been happening there. Then secondly, another one on Reebok. Just curious to hear when that latest round of restructuring has been decided about and been initiated. Also, given that you have decided to reinvest some more group profits into Reebok rather than elsewhere, I was just wondering whether and what kind of targets and checkpoints you've defined along the way.
What sort of improvements at Reebok would you want to see achieved by, say, mid 2017, subject to which you decide about any future steps? Thank you.
Okay. Adrian, thank you very much. That's exactly what we're seeing in terms of improving full price sell-through. It's one of our strategic goals, and I think that if you think of the chart we've just shown on the web, this is 400 basis points or something of improvements coming from the mix and increases in prices. We're also seeing less clearance. We're getting better full price sell-through. You talked about the 10 basis points improvement for the U.S. in the third quarter, if you take the whole nine months, we got a 1.1 percentage point improvement there, and that is the quality of the product and the pricing we were able to get for that.
On the Reebok side, without mentioning a date, the decision's been taken very recently if we were to enter that way. When it comes to the improvement plan, we have a plan in place that I said that we'll monitor with a number of milestones in, we expect those milestones to be met. As I also tried to indicate, we will be very disciplined in the way of following up upon that to ensure that we can achieve what we need to achieve. If not, then we'll deal with the matter when we get there. Right now, we put a plan in place that we will not disclose. Of course, the plan expects significant progress in its contribution from Reebok. What I do want to say also on this call is that Reebok is 10% of our overall business.
While it's important that we fix Reebok, which we will fix, then the more important part is we continue the growth trajectory in adidas, particularly also in the U.S. Over time, as also indicated during our speech today, that we continue to have an expansion on our margin and our profitability.
Okay. Got you. Thank you, and good luck.
Thank you. Our next question comes from Geoff Lowery from Redburn. Please go ahead.
Yeah. Hi, team. Two questions, please. Firstly, can you help us out with the profit or rather loss in the golf assets that you expect to be disposing of? Secondly, in terms of the non-FX components of gross margin, which of those do you think can recur, and in what sort of quantum next year and beyond?
Okay, Geoff, I'm struggling a little bit to understand your second question, I'll come to that in a minute. Firstly, TaylorMade. Well, all we're doing is flagging, obviously, that we're getting close to doing a deal, we believe. We would hope to have something clear by the end of this year. We're just highlighting that there is a chance there may be a loss on disposal. Cannot quantify that in any way at the moment. We just wanted to flag it, that's all. As Kasper said in his comments, this has no bearing on the underlying strength of the operations of the full business. Your second question, you were asking about what are the parts in the gross margin excluding hedging. Is that right?
Yeah. Basically what I was trying to get at was if your underlying gross margin is going to be up the best part of 400 basis points or so this year, could that number next year be 200 to 300, then we take whatever view we want to on FX?
Well, Geoff, I'm going to have to refer you to guidance 2017 we're going to give at the beginning of next year.
Okay. Thank you.
I can't give you anything other than that at the moment. I think if you refer back to the question that I answered from Jürgen a minute ago, you can see we have great confidence in the improvement of the product offerings for the consumers, our ability to price, our ability to sell more and more full price sell-through. I think you should have some confidence in the overall development of our margin.
Thank you.
You're welcome.
Thank you. Our next question comes from Piral Dadhania from RBC Capital Markets. Please go ahead.
Thanks for taking my question. Welcome, Kasper. If I could just start with the U.S. apparel category. Some of your peers have been flagging the expected slowdown in that category in the U.S. market, in particular. If we look at your apparel performance, it looks like there's about a four or five percentage point slowdown year-over-year on an underlying basis, notwithstanding the impact from the European football jersey sales in the base. I just wondered any comments that you might have on the U.S. apparel market and how you're seeing that evolving. Secondly, if I could just ask around your SKU offer really. I think that your goal was to reduce SKU count by about 25%. Of course, it's very clear that the footwear silos that you have now are doing very well.
I just wanted to kind of get an indication of whether the reduction in the product, the assortment of the product, has been helpful in driving your overall top line within the adidas Originals and lifestyle franchises. Finally, just on women's. I just wanted any indication you might be able to provide in relation to the contribution that women's has had on your organic revenue growth of 16%. Are you seeing that part of the business growing faster or slower than the group average? Thank you.
Okay, Piral. Thanks for those good questions. Allow me maybe to take the first question, say for Kasper, because, as he mentioned earlier, we're still getting up to speed with some of this. Quite frankly, the point about the U.S. with apparel, and you may be quoting some other brands' experiences, is not our experience. We're very satisfied with the overall growth of everything in the U.S. at the moment, including apparel. We said that this is not a sprint. It's a marathon. We want solid, sustainable growth. That's exactly what we're getting in the States, and this quarter again, up on the good growth that we already had in the previous quarter. I don't see anything in the market that's causing us, because we're so small there in any case, to have any specific slowdown in the apparel area. SKUs, yep, definitely. That's exactly what's happening.
We are on track to reduce our SKU offerings by the 25%, it's the concentration also on these management of the franchises of our various product, not just in the leisure lifestyle offering, but also in our performance offering and managing that I think is indeed helping us be more impactful in the market. That is definitely a positive also for the leisure lifestyle area. Women's, I'd love to be able to quote a figure for you here. At the moment, women's is still a smaller part of our business. I can confirm we're growing faster in this area, and I'm sure that at some stage we'll start sharing information with you in that area. It's a very manual process for us to identify that at the moment. We don't have anything else to share with you today on that.
Brilliant. Thank you.
Thank you. Our next question comes from Jamie Bajwa from Goldman Sachs. Please go ahead.
Afternoon, everyone. Thank you for taking my calls and my questions. Just a couple of questions from me. First of all, just on your CapEx guidance for this year. I've seen this come down, I'm just wanting to understand what the driver behind that was. Second of all, which is a slightly more strategic one related to digital. I know there's going to be very limited that you can actually share at the moment, I don't know if you could help us understand a little bit in terms of how this digital strategy will fit in terms of your channel mix, particularly in terms of wholesale partners. What work you'll be doing there, because I know obviously you've got your partnership with Zalando, but how you kind of expect that to evolve going forward. Thank you.
Jamie, to CapEx, well, over the last few years, we've tended to come in a little bit lower than our guidance here. At the end of the nine months, I think in CapEx, we've only spent about EUR 360 million. The reason we've now reduced the guidance from EUR 750 to EUR 650 the full year is just the practical one in terms of we're not finding the shops to be able to do all of the investment that had initially been planned. As I said, this is often the case. We do an optimistic plan, optimistic in terms of what we wish to open, but we still got to find the locations and it's the timing. It's really just a timing thing. Definitely nothing from a strategic point of view or a different decision.
Related to your question about digital, without going into too much detail, but it's clear, at least to us, that digital is much more than just the dot-com shop and will impact the entire organization and, of course, have a fundamental impact on the overall speed projects that we have. Maybe on the dot-com and how it relates to our go-to-market route. I think it's clear that there is no one unique go-to-market route, whether it's wholesale, own retail or pure play online providers like a Zalando. What is equally clear is as a branded manufacturer of sporting goods, being the second largest in the world, a strategic channel for us to market is our dot-com. That will play a fundamental role in moving forward for us, and I don't see that as in contradiction to any of our other partners.
I think maybe five or 10 years ago, that question would've been asked, but I think it is completely accepted by the marketplace and much more important by the consumer
There is an expectation from the consumer that he or she can transact directly with us, we need to ensure that we create the best possible transaction experience throughout our e-com side, while at the same time also ensure that we have very qualified wholesale partners and great retail stores. One of them, Robin has talked about the opening of our store in New York coming in December. Clearly, as I said, this is the only global store that we have, we need to make certain that we exploit it to the most, along with the other channels to market. As I said, there is no inherent conflict. That would have been the case 5 or 10 years ago. That is not the case today because consumers expect to have multiple access routes to market.
More on that when we hopefully meet in March. I would say, I think somebody was asking for a teaser. Maybe that was a teaser.
Okay. Thank you very much, Kasper. Thank you very much, Robin. Ladies and gentlemen, that completes our conference call today. As always, if there are any open questions, and I could imagine that there are a couple, please feel free to contact either Christian or myself or any other member of the team. Kasper has already teased our next event in March. That will be on March 8th, the release of our full year results, followed by the Investor Day on March 14th, which will take place here in Herzogenaurach. We, of course, hope that we will see many of you here in beautiful Franconia. We will also be on the road over the next couple of weeks on road shows and visiting some conferences and look forward to meeting you there and catching up with you then.
While we're on that topic, Kasper also mentioned that he's planning to go to New York, London, and Frankfurt in December. I just want to make sure that we're all on the same page here. This trip, and Kasper mentioned that, will be purely of informal nature. That means that we're not going to discuss any business topics there. The purpose really is that Kasper wants to meet some of you guys and that some of you get the opportunity to meet him before we have the official Investor Day in March. Again, no business-related topics. With that, I would like to thank you again for your participation today. Wish you a very good day and look forward talking to you. Bye-bye