Adidas lifts full-year guidance, shares bounce

17th Jul 2024 11:36

(Sharecast News) - Shares in Adidas sparked on Wednesday, after the German firm boosted full-year guidance for the second time in three months.

The sportswear giant said second-quarter currency neutral revenues had jumped 11%, or by 9% in euros, to €5.8bn.

Once Yeezy sales were stripped out in both the current year and last year, currency neutral sales rose 16%.

Operating profits came in at €346m, up from €176m a year previously, including around €50m from the sale of parts of the Yeezy inventory.

Adidas said it had seen strong sales to retailers as well as reduced discounting, lower sourcing costs and "a more favourable category mix".

As a result, Adidas upped its full-year guidance for the second time this year. It now expects currency neutral revenues to increase at a high single digit rate, up from previous guidance for a mid-to-high single digit improvement.

Unfavourable currency effects were still expected to weigh "significantly" on profitability this year, Adidas warned.

But despite that, operating profits were forecast to come in higher that earlier thought, at €1bn. Adidas had initially forecast annual operating profits of €700m

As at 1115 BST, the stock was trading 4% higher.

Adidas was hit hard after its relationship with controversial rapper Kanye West came to an abrupt end. His Yeezy branded trainers had proved hugely popular, but following a series of anti-Semitic remarks, Adidas cut ties with West late in 2022.

The fallout wiped millions off profits as well leaving Adidas with significant Yeezy inventory.

However, chief executive Bjorn Gulden - who joined in early 2023 from Puma - launched a major turnaround programme, including striking a deal to offload the remaining inventory.

Adidas has also been seen a rise in competition from smaller brands, but many of its trainers - such as Sambas and Gazelle - have become hugely popular.

Dan Coatsworth, investment analyst at AJ Bell, said Adidas had "given the market hope that ailments in the sporting footwear market don't appear to be getting worse.

"Big brands like Nike and Adidas have been clouded by worries that younger, fresher brands were eating their lunch. Adidas has now increased its full-year guidance for the second time in three months, putting a spring in its step."