After reporting preliminary results for the second quarter, Adidas has again bumped up guidance for the year.
In the second quarter, currency-neutral revenues increased 11 percent versus the prior-year second quarter. In euro terms, the company’s revenues grew 9 percent to €5.82 billion from €5.34 billion in Q2 last year. Excluding Yeezy sales in both years, currency-neutral revenues increased 16 percent for the quarter. This is the second increase in guidance for the three-stripe brand this year after the company first saw the positive writing on the wall after closing the first quarter.
The company’s second-quarter gross margin reached 50.8 percent of sales in the quarter, down 10 basis points from 50.9 percent of sales in Q2 2023.
The company reported that “underlying Adidas gross margin improved strongly, reflecting better sell-throughs, reduced discounting, lower sourcing costs, and a more favorable category mix.” The significantly smaller Yeezy business reportedly negatively impacted its year-over-year comparison.
The company’s second-quarter operating profit increased to €346 million from €176 million in the year-ago quarter, including a contribution of around €50 million from selling parts of the remaining Yeezy inventory.
Following the better-than-expected performance during the quarter and considering the current momentum, Adidas increased its full-year guidance and is now forecasting currency-neutral revenues to increase at a high-single-digit rate in 2024, up from the previous April 2024 guidance for mid- to high-single-digit growth.
The company’s operating profit is now expected to reach around €1.0 billion, up from the April forecast that called for full-year operating profit of around €700 million.
Within its guidance, Adidas reported it assumed the sale of the remaining Yeezy inventory during the remainder of the year to occur on average at cost; this would result in additional sales of around €150 million and no further profit contribution during the remainder of the year.
The company said it continues to expect unfavorable currency effects to significantly weigh on the company’s profitability this year.
“These effects are negatively impacting both reported revenues and the gross margin development in 2024,” the company wrote in a release. “This was particularly the case during the first half of the year,” the company concluded.
Image courtesy Adidas
