Adidas updated its guidance for the year after reporting better-than-expected preliminary results for the second quarter of 2024.
According to the German athletic company, currency-neutral revenues increased 11 percent compared to the prior year level. In euro terms, the company’s revenues grew 9 percent to 5.822 billion euros in the second quarter, versus 5.343 billion euros at the same time last year. Operating profit in Q2 grew to 346 million euros, which included 50 million euros from Yeezy sales.
Gross margin grew to 50.8 percent in Q2, which was bolstered by improved Adidas sell throughs, less discounts and lower sourcing costs. The smaller Yeezy business was down year-over-year.
Given the solid quarter, Adidas raised its guidance for the second time this year and and now expects 2024 currency-neutral revenues to grow in the high-single-digits, up from its prior guidance that projected increases at a mid- to high-single-digit rate. Operating profit is projected to hit 1 billion. This guidance assumes that remaining Yeezy inventory will be sold through the year at cost, which will result in sales of about 150 million Euros.
Adidas also noted in a release that it expects “unfavorable currency effects to weigh significantly on the company’s profitability this year.”
“These effects are negatively impacting both reported revenues and the gross margin development in 2024,” the company said. “This was particularly the case during the first half of the year.”
Adidas positive guidance comes as its largest rival, Nike, struggles to regain its footing amid slumping sales and an innovation lull. In an early July note to investors, Wedbush analyst Tom Nikic said that Nike’s recent pitfalls “could be a major opportunity for Adidas,” which has only recently started recovering from its own challenges.
“With industry leader Nike struggling deeply and preparing themselves for significant revenue declines over the next six to 12 months, this could be a major opportunity for Adidas,” Nikic wrote, adding that the Three Stripes is already “starting to regain momentum” from the recent success of its retro styles like the Samba and Gazelle.
