Adidas experienced a significant 8.2% increase in its shares following an unexpected positive turn in the first quarter. The German sportswear company raised its full-year guidance, projecting a mid-to high-single-digit growth rate in currency-neutral revenues for 2024. This was a drastic change from the previous forecast of a mid-single-digit growth rate. Additionally, the company reported a lucrative year-on-year profit increase, with operating profit anticipated to reach around 700 million euros, a substantial increase from the initial forecast of near 500 million euros.
Adidas strategically addressed its loss-making Yeezy inventory by selling off the remaining stock after parting ways with Ye, the rapper formerly known as Kanye West. The company foresees an additional 200 million euros in sales from the sale of the rest of the Yeezy inventory throughout the year. This move not only helps in boosting sales but also highlights Adidas’ ability to adapt and pivot to enhance profitability.
Preliminary figures showcase an impressive first-quarter operating profit of 336 million euros, compared to 60 million euros in the same period last year. Despite the growth prospects, Adidas acknowledges that unfavorable currency effects will impact its profitability throughout the year. However, the company remains optimistic about its growth trajectory, especially with the positive response from the market and analysts indicating a strong earnings momentum story.
The underlying sales growth from Yeezy products has reinforced the accelerating momentum of the Adidas brand. Moreover, the company’s partnerships with global sporting events like the Olympics, Paralympics, EURO 24, and Copa events are expected to provide a significant boost. Analysts believe that the Terrace footwear brand will play a crucial role in driving momentum across other product lines, especially with the upcoming summer sports season.
Adidas’ recent performance and strategic maneuvers showcase a positive turnaround, positioning the company for sustained growth and profitability. With a focus on innovation, strategic partnerships, and effective inventory management, Adidas is carving out a promising path in the competitive sportswear industry.