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Adidas increased its full-year guidance for the second time in three months this year in the latest confirmation that its chief executive’s turnaround plan was gaining pace.
The sportswear group now expects operating profit at €1bn for the full year compared to an earlier guidance of €700mn. Full year sales adjusted for currency swings are forecast to rise by high-single digits, compared to the previous guidance of a “mid to high single-digit rate”, it said.
Under chief executive Bjørn Gulden, who was poached from Puma in early 2023, Adidas has been increasing distribution through independent retailers, scaling down attempts to control a greater share of its sales to consumers. The company has also been benefiting from the popularity of its Samba and Gazelle sneakers, which have turned into fashion icons.
The brand said on Tuesday that it was seeing strong sales to retailers, as well as “reduced discounting, lower sourcing costs and a more favourable category mix”. However, it warned that currency fluctuations will “weigh significantly” on profitability in 2024.
The results come after larger rival Nike spooked investors with a gloomy outlook last month, and days after the Adidas-sponsored Spain team beat Nike’s England team in the final of the Euro 2024 tournament in Berlin.
Shares in Adidas have outperformed Nike’s dramatically this year. While the German brand’s stock has risen more than 25 per cent since January, Nike is down 33 per cent over the same period.
The company also pre-released better than expected second-quarter results late on Tuesday, saying that sales, excluding its defunct Yeezy brand, grew 16 per cent year on year in the three months to June. Operating profit rose to €346mn, beating analyst expectations of €266mn and doubling compared to a year earlier.
Gulden said earlier this year that Adidas had postponed the launch of its leading sneaker models as it did not want to undermine its own success. The negative impact from its late-2022 decision to terminate a highly successful partnership with US rapper and fashion designer Kanye West after his antisemitic remarks, have also eased as Adidas reduced the bulk of its unsold Yeezy inventory.
Adidas expects to sell the remaining Yeezy stock by the end of the year, which would generate an additional €150mn in sales, although it did not expect “further profit contribution”. The company had earlier said that it would donate part of the proceeds to charity. In the second quarter, Yeezy sales contributed €50mn to operating profit.
The sportswear group had earlier said that sales in China were rebounding after the brand suffered from the Covid-19 lockdown as well as anti-western sentiments that led to a consumer boycott.
The company last month said that two employees in China had left the sportswear company after it found evidence of wrongdoing during an investigation into a whistleblower’s embezzlement claims.
Adidas will report detailed quarterly results on July 31.
