Adidas has raised its full-year forecast for the second time this year, in just three months. This is the latest sign that the turnaround plan of its CEO’s is gaining momentum.
Sportswear Group now expects an operating profit of €1bn over the course of the year, compared to its earlier guidance for €700mn. The group said that full-year sales, adjusted for currency fluctuations, are expected to increase by high single digits compared to its previous guidance.
Adidas, under the leadership of Bjorn Gulden (who was hired from Puma at the beginning of 2023), has increased distribution via independent retailers and scaled back attempts to control more sales to consumers. Adidas has also benefited from the success of its Samba sneakers and Gazelle sneakers. These have become fashion icons.
The brand reported on Tuesday strong sales at retailers as well as “reduced discounts, lower sourcing and a more favorable category mix”. It warned, however, that currency fluctuations would “significantly” impact profitability in 2024.
The results came after Nike, a larger competitor, spooked investors last month with a gloomy forecast. Days later, the Adidas-sponsored Spain beat Nike’s England in the finals of the Euro 2024 in Berlin.
Adidas shares have performed dramatically better than Nike’s this year. The stock of the German brand has increased by more than 25% since January. Nike’s share price is down 33% over the same time period.
In a pre-release late Tuesday, the company announced that its second-quarter sales were better than expected. Sales, excluding the defunct Yeezy, grew by 16 percent year-over-year in June’s three-month period. Operating profit grew to €346mn in the second quarter, exceeding analyst expectations and doubling from a year ago.
Gulden stated earlier this year Adidas postponed its launch of its top sneaker models because it didn’t want to undermine their own success. Adidas’ decision in late 2022 to end a successful partnership after Kanye West made antisemitic comments has also had a positive impact as it reduced its Yeezy stock.
Adidas anticipates selling the remaining Yeezy stocks by the end the year. This would generate additional €150mn sales. However, it does not expect “further profits contribution”. The company said earlier that it would donate a portion of the proceeds to charity. In the second quarter of 2016, Yeezy sales contributed €50mn in operating profit.
The sportswear group said earlier that sales were recovering in China after the brand was affected by the Covid-19 ban and anti-western sentiments which led to a boycott.
Last month, the company announced that two employees had quit its sportswear division in China after an investigation revealed evidence of wrongdoing. The investigation was conducted following a whistleblower who claimed to have been embezzled.
Adidas will release detailed quarterly results by July 31.
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