Adidas lifts forecast amid strong sales of Sambas and Yeezys
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The German sportswear company now expects to generate operating profit of around €1 billion (S$1.47 billion).
PHOTO: REUTERS
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Adidas raised its annual profit target for the second time in three months amid soaring demand for classic sneakers like the Samba and more sales from the shrinking stockpile of Yeezy footwear.
The German sportswear company now expects to generate operating profit of around €1 billion (S$1.47 billion), according to a statement. That is up from the previous forecast of €700 million and in line with analyst estimates.
Second-quarter sales also beat expectations, rising 11 per cent from the same time in 2023 to hit €5.82 billion. Excluding Yeezy products, sales would have risen by 16 per cent, showing that Adidas’ recovering core business is becoming less dependent on Yeezy footwear than it was last spring and summer.
Adidas’ American depositary receipts rose 2.7 per cent after the update on July 16.
Chief executive officer Bjorn Gulden is trying to orchestrate another era of fast growth at Adidas and close the gap with industry leader Nike, which has struggled of late. Adidas’ net sales fell in 2023, hurt by the cancelled partnership with the rapper and designer Ye, formerly known as Kanye West.
Returning Growth
Adidas has pledged to return to growth in 2024, with the momentum expected to accelerate in the second half as it trims inventories of Yeezy footwear and apparel in the US. Besides the Samba, Adidas has also seen strong demand for classic models, in a variety of colours, such as the Gazelle, Spezial and Campus.
The Yeezy business contributed about €50 million in operating profit during the second quarter, or about 14 per cent of the total. At its height, Yeezy footwear was generating close to half of Adidas’ profits.
Last summer, Gulden warned that the first Yeezy drop in May and June 2023 was full of the franchise’s highest-priced and most sought-after products, including the chunky Yeezy Boost 700, which previously sold with a price tag of US$240 (S$322), and the sleek Yeezy Boost 350 sneakers, which have retailed for US$220.
Future payoffs may become less pronounced, Mr Gulden said then, since the remaining mix of products includes more of the cheaper footwear, like the Yeezy Slide sandal, which used to sell at US$55.
With its upgraded forecast, Adidas is again assuming that it will sell the remainder of its Yeezy products at cost. If it were to do that in 2024, it would generate about €150 million in revenue from the franchise but no profits, the company said. Adidas has repeatedly made that assumption in its forecasts, then gone on to post profits from Yeezy sales.
Beyond Yeezy, Adidas’ underlying business benefited in the quarter from lower levels of discounting, lower sourcing costs and better demand for its three-striped products, it said. Even so, unfavourable currency effects are continuing to weigh on profits, it said. BLOOMBERG
