Companies

Better-than-expected second quarter results for adidas

Jul 17, 2024 Germany

According to preliminary results for the second quarter of the year, the German-based sportswear company posted a better-than-expected quarter and raised its full-year guidance as a result

In the second quarter of fiscal year 2024, adidas revenue increased by 11% on a currency-neutral basis, as compared to the same period of last year. In euro terms, revenue grew by 9% versus the prior year to reach 5.82 billion euros. The company added that excluding Yeezy sales in both years, currency-neutral revenue increased by 16% during the quarter.

The company’s gross margin declined to 50.8% in the quarter from 50.9% in the same period of the previous year. However, “the underlying adidas gross margin improved strongly, reflecting better sell-throughs, reduced discounting, lower sourcing costs and a more favourable category mix”. The Yeezy business, although smaller, still hurt the year-over-year comparison.

Overall, adidas’ second-quarter operating profit increased to 346 million euros from 176 million euros in the same quarter of 2023, including a contribution of around 50 million euros from the sale of parts of the remaining Yeezy inventory.

Therefore, “following the better-than-expected performance during the quarter and considering the current momentum”, the company has raised its full-year guidance.

For 2024, it now expects currency-neutral revenue to increase at a high-single-digit rate (previously: increase at a mid- to high-single-digit rate) and operating profit to reach a level of around 1.0 billion euros (previously: to reach a level of around 700 million euros). The company also expects to sell all remaining Yeezy inventory by the end of the year, which will increase their sales by 150 million euros but will not generate any additional profit.

However, despite its optimistic stance, adidas continues to expect unfavourable currency effects to significantly impact the company’s profitability this year. “This was particularly the case during the first half of the year”, it said.

Image Credits: designscene.net

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