Adidas raises profit guidance amid ‘strong’ Q1 results

Adidas has raised its profit guidance from €500m (£426.8m) to €700m (£597.6m) following a “better-than-expected” performance in the first quarter 2024.

The group reported an operating profit of €336m (£286.8m) compared with €60m (£51.2m) in the prior-year period, reflecting an operating margin of 6.2% (2023: 1.1%).

In the first quarter of 2024, currency-neutral revenues also increased 8% versus the prior-year level.
This positive growth was driven by the strong momentum of the underlying Adidas business, which grew 5% in Q1.

In addition, the sale of parts of the remaining Yeezy inventory generated revenues of around €150m (£128.06m) during the first quarter.

In euro terms, the company’s revenues grew 4% to €5.45bn (£4.65bn) in the first quarter, as currency developments led to an “unfavourable” translation impact.

Moreover, footwear revenues increased 13% during the quarter on a currency-neutral basis, driven by the strong brand momentum, particularly in the Originals and Football categories. While apparel sales were up 2% in Q1.

The group’s accessories revenues declined 1% during the quarter.

Sales in Adidas’ Own Retail stores and e-commerce business also increased 11% and 34% respectively in Q1. While the Yeezy sales contributed to this increase, the company’s revenues across its own digital platforms also increased at a double-digit rate, if adjusted for the Yeezy effect. Currency-neutral sales in wholesale were also up 2%.

Additionally, the group recorded “strong” growth in all markets except North America which saw a 4% decline in revenues.

Looking ahead, the group expects revenues to increase at a mid- to high-single-digit rate in 2024.
Within the upgraded profit-guidance it is also assumed that the remaining Yeezy inventory will be sold on average at cost, resulting in sales of around €200m (£170.7m) throughout the remainder of the year.

Bjørn Gulden, Adidas CEO, said: “I am very happy to see that the business in Q1 developed better than we had expected. Sales, gross margin, and operating profit were all better than initially planned. Our full-price sales in our DTC channels were strong and our sell-out with our retail partners was higher than the sell-in. This means lower inventories, less discounts, and better gross margins both for our retail partners and for us….

“The markets are still volatile and not easy, but we feel we are making progress everywhere. The increased brand heat and the improved sell-through is supporting us in building better relationships with our retail partners and it buys us time to continue to invest in making Adidas again a better brand and company.”

He added: “We will continue to ‘over invest’ into the product, into the brand, into sales and marketing to ensure continued growth. We will not try to optimise short-term profit. We know we are not as good as we should be, but I feel that we are making the progress that we had hoped for. We now look forward to celebrating the great sports events like the Euro 2024, Copa América, the Olympics and Paralympics. It is a great year for sports – let us all enjoy it.”