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Stocks of Adidas Rally to Two-Year Highs After Guidance is Raised

April 17, 2024
minute read

Adidas shares experienced a significant surge on Wednesday as the renowned athletics-apparel manufacturer continued its trend of preemptively disclosing results that surpassed expectations.

On late Tuesday, Adidas (ADS, +8.64% ADDYY, +5.56%) revised its full-year forecast upwards, now anticipating an operating profit of approximately €700 million, compared to the prior guidance of around €500 million. This adjustment accompanies an expectation of mid- to high-single-digit sales growth at constant currencies, in contrast to the previous projection of mid-single-digit growth.

This revision follows a first-quarter revenue increase of 4%, amounting to €5.46 billion, and an operating profit of €336 million. Analysts had initially anticipated an operating profit of €143 million with stagnant sales.

Adidas has consistently released what are termed as "ad hoc" announcements in Germany, pre-releasing results for the past four quarters consecutively.

The latest Yeezy drop contributed to an operating profit of €50 million on revenue of €150 million, as disclosed by Adidas. The company highlighted that its guidance includes the expectation of selling the remaining Yeezy inventory, totaling €200 million in sales, at cost.

In 2022, Adidas terminated its partnership with Kanye West following antisemitic remarks made by the American rapper. However, in January, the company opted not to write off its remaining inventory of Yeezy apparel produced in collaboration with West.

Analysts at Stifel, led by Cedric Lecasble, indicated that the first-quarter outperformance only elucidates half of the underlying enhancement to the 2024 guidance. They further noted that the Yeezy dynamics are characterized by an "ultraconservative" approach.

Prior to the pre-release, Morgan Stanley upgraded its rating on Adidas from underweight to overweight, citing a growing demand for lifestyle footwear and a signature basketball sneaker endorsed by NBA player Anthony Edwards.

Adidas shares soared by as much as 7%, marking a 17% increase in value for the year.

John Liu
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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