Adidas shares rose by 8.2% on Wednesday following an announcement that the company had raised its full-year guidance unexpectedly. According to the German sportswear company, currency-neutral revenues are now expected to see a mid-to high-single-digit growth rate for the full year 2024. This is in comparison to the previous projection of growth near a mid-single-digit rate.
Adidas reported a year-on-year increase in profit in the first quarter. The firm stated that operating profit for the year is expected to reach around 700 million euros, a significant increase from the previous forecast of operating profit near 500 million euros. The company also expects the sale of the remaining Yeezy inventory to result in additional sales of around 200 million euros.
Adidas disclosed that its operating profit in the first quarter rose to 336 million euros from 60 million in the same period last year. However, the firm warned that unfavorable currency effects are likely to impact profitability throughout the year. These effects are expected to weigh significantly on Adidas’ reported revenues and gross margin development.
Future Sales Growth Projections
Despite the challenges posed by unfavorable currency effects, Adidas is optimistic about its future sales growth. UBS analysts highlighted that the underlying sales growth from Yeezy products confirms the rapidly accelerating momentum of the Adidas brand. The guidance provided by the company and the expectation of increased sales growth throughout the year have been positively received by the market.
Partnerships and Product Expansion
Adidas is looking to boost its sales through partnerships with major sporting events such as the Olympics, Paralympics, EURO 24, and Copa events scheduled for this year. The company is also focusing on driving momentum in its other franchises, with particular emphasis on its Terrace footwear brand. According to Mamta Valechha, a consumer discretionary analyst at Quilter Cheviot, the company’s investment in performance shoes and cleaner inventories are expected to drive retailers’ interest in stocking more Adidas products.
Adidas’ unexpected increase in full-year guidance and improved profitability in the first quarter have resulted in a significant surge in its stock value. Despite challenges related to unfavorable currency effects, the company remains optimistic about its future sales growth and brand momentum. The market response to Adidas’ updated guidance indicates that the company is positioned as one of the best earnings momentum stories in the sportswear industry.
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