Adidas shoes are on display at a DSW store in Novato, California on January 31, 2024.
Justin Sullivan | Getty Images
Shares of Adidas rose 8.2% on Wednesday after the corporate unexpectedly raised its full-year forecast and reported a year-over-year rise in first-quarter profit.
The German sportswear company said it now expects full-year 2024 currency-neutral sales to grow at a mid- to high-single-digit rate, compared with an earlier forecast of growth near a mid-single-digit rate.
Operating profit for the 12 months is now expected to achieve around 700 million euros ($745 million), Adidas said in its unscheduled trading update published late Thursday. An operating profit of around 500 million euros had previously been forecast.
Adidas has sold off its loss-making Yeezy holdings since cutting ties with Ye, the rapper formerly often called Kanye West. The company said it now expects the sale of the remaining Yeezy inventory to lead to additional sales of around 200 million euros throughout the 12 months.
The company also announced that its operating profit in the primary quarter rose to 336 million euros, in accordance with preliminary figures, in comparison with 60 million in the identical period last 12 months.
Unfavorable currency effects are expected to weigh “significantly” on Adidas’ profitability this 12 months, impacting each reported sales and gross margin development, the corporate said in its report.
Adidas experienced a 12 months of transition in 2023 after losing revenue from Yeezy sales. Back in March, CEO Bjørn Gulden said that he expected some growth in the primary quarter, which might increase within the second half of this 12 months.
The underlying sales growth of Yeezy products confirms the “rapidly increasing momentum” of the Adidas brand, in accordance with UBS analysts. The forecast and continued expectation of higher sales growth all year long are well received by the market, making Adidas one among the “best earnings momentum stories in the industry,” analysts said.
The sportswear company can be aiming for a lift this 12 months through its partnerships with the Olympics, Paralympics, EURO 24 and Copa.
Mamta Valechha, consumer discretionary analyst at Quilter Cheviot, identified that the corporate’s Terrace footwear brand should drive momentum in other franchises.
“With a busy summer sports calendar, the group is investing in performance footwear (running and basketball) and with stocks lower, we suspect retailers will want more of adidas on their shelves as the brand is obviously on the rise,” said Valechha.
— CNBC’s Ganesh Rao and Jenni Reid contributed to this report.
