Adidas, the German sportswear company, experienced a significant 8.2% jump in its shares following an unexpected increase in its full-year guidance and a rise in year-on-year profit in the first quarter. The company now anticipates currency-neutral revenues to grow at a mid-to high-single-digit rate for the full-year 2024, a notable improvement from the previous mid-single-digit rate projection. Operating profit is also expected to reach approximately 700 million euros, a substantial increase from the initial forecast of 500 million euros.
One of the key factors contributing to Adidas’ positive outlook is the sale of its Yeezy inventory after parting ways with Kanye West. The company foresees an additional 200 million euros in sales from the remaining Yeezy inventory throughout the year, underscoring the strategic decision to offload the loss-making products. The first-quarter operating profit climbed to 336 million euros, a significant improvement from the previous year’s 60 million euros.
Despite the optimistic guidance, Adidas acknowledges that unfavorable currency effects may exert a substantial impact on its profitability this year. The company navigated a transition period in 2023 following the revenue loss from Yeezy sales. CEO Bjørn Gulden remains confident in the growth trajectory, particularly as the sales momentum from Yeezy products underscores the acceleration of the Adidas brand.
Analysts at UBS view Adidas as a standout performer in the sportswear industry, citing the company’s robust earnings momentum and anticipation of improved sales growth throughout the year. The partnerships with major sporting events such as the Olympics, Paralympics, EURO 24, and Copa events are expected to provide a further boost to Adidas’ performance. Additionally, the focus on performance shoes, particularly in running and basketball categories, demonstrates a strategic shift towards driving momentum across different product lines.
Consumer discretionary analyst Mamta Valechha highlights the potential of Adidas’ Terrace footwear brand to invigorate growth in other franchises, especially with a busy summer sporting calendar on the horizon. Cleaner inventories and a heightened demand for Adidas products from retailers signal a positive trend for the iconic brand. Overall, the market response to Adidas’ latest developments underscores its position as a frontrunner in the competitive sportswear market, with promising prospects for sustained growth and innovation.