Adidas raises earnings guidance as sales exceed expectations

Adidas has raised its full-year profit guidance following an exceptional performance in the first quarter of 2024. The company now anticipates a full-year operating profit of approximately 700 million euros ($744 million), up from the previously forecasted 500 million euros.

Recovery after annual loss

This optimistic outlook for 2024 follows a recent setback, as Adidas reported its first annual loss in over three decades, primarily due to challenges in North America. However, the company is now seeing signs of recovery, particularly in its operating profit.

Adidas expects currency-neutral sales to increase by a mid-to high single-digit percentage in 2024, surpassing the earlier projection of a mid single-digit rate. This positive sales forecast reflects the company's confidence in its business strategy and market performance.

Share price response

The announcement of the increased profit guidance has had a positive impact on Adidas' share price. Frankfurt-listed shares in the company rose by 3.5% following the news, indicating investor confidence in the company's future prospects.

Yeezy business performance

Adidas reported quarterly operating profit of 336 million euros, a significant increase from 60 million euros in the previous year. The resurgence in profitability can be attributed to the successful performance of its Yeezy business, with sales contributing 150 million euros in revenue and an operating profit of around 50 million euros in the quarter.

The company expects to sell the remaining Yeezy inventory for approximately 200 million euros later in the year, although without any additional profit contribution. This move reflects Adidas' strategic focus on managing its inventory and optimizing its product portfolio.

Challenges ahead

Despite the positive outlook, Adidas acknowledges the continued impact of unfavorable currency effects on its profitability in 2024. The company anticipates these effects to affect both reported revenues and gross margin development throughout the year, highlighting the need for careful financial management and adaptation to market conditions.