Adidas shares surged by 6.3% after the company unexpectedly raised its full-year guidance and reported a year-on-year profit increase in the first quarter. The German sportswear company now expects currency-neutral revenues to grow at a mid-to high-single-digit rate in full-year 2024, compared to its previous projection of mid-single-digit growth. Adidas also raised its operating profit forecast to around 700 million euros, up from its previous estimate of 500 million euros. The company has been selling off its Yeezy inventory following its split from rapper Kanye West, with additional sales of around 200 million euros expected from the remainder of the inventory.
In the first quarter, Adidas reported an operating profit of 336 million euros, a significant increase from 60 million euros in the same period last year. However, the company warned that unfavorable currency effects would have a significant impact on profitability this year, affecting both reported revenues and gross margin development. Adidas underwent a transition year in 2023 after losing revenue from Yeezy sales, but CEO Bjørn Gulden anticipates growth in the first quarter that will strengthen in the second half of the year. The sportswear company is also looking to benefit from partnerships with major events such as the Olympics, Paralympics, EURO 24, and Copa events in 2024.
Investors responded positively to Adidas’ improved financial outlook, causing its shares to rise following the announcement. The increase in revenue guidance and operating profit forecast signals increased confidence in the company’s performance for the remainder of the year. The decision to sell off Yeezy inventory following the split with Kanye West has allowed Adidas to focus on other areas of growth and profitability. The company’s strong first-quarter performance, with a substantial increase in operating profit, demonstrates its ability to adapt and succeed in the evolving market landscape.
Adidas’ improved financial performance comes at a time when the company is navigating challenges related to currency fluctuations and the impact of its Yeezy inventory sales. Despite these challenges, the sportswear company remains optimistic about its prospects for growth in the coming quarters, with expectations of strengthening performance in the second half of the year. By leveraging partnerships with major sporting events, including the Olympics and EURO 24, Adidas aims to capitalize on opportunities to drive sales and enhance its brand presence.
Adidas’ strategic decision to increase guidance and operating profit forecasts reflects its proactive approach to addressing market challenges and positioning itself for future success. The company’s focus on optimizing its product portfolio, streamlining operations, and capitalizing on partnership opportunities demonstrates its commitment to driving growth and profitability. With a strong first-quarter performance and a positive outlook for the remainder of the year, Adidas is well-positioned to capitalize on market opportunities and deliver value to shareholders.
