Adidas Sets Faster Pace in Mid-Sport Summer Sneaker Sales Sprint – Update

By Andrea Figueras

A steady pace in sneaker sales is driving higher profits at Adidas as the company tries to get back on track after the stumbles of recent years.

The German sportswear giant made a net profit of 190 million euros ($205.5 million) in the second quarter, up from 84 million euros in the year-ago period, it said on Wednesday. The company confirmed pre-release sales figures up nearly 9% to €5.82 billion, with footwear revenue leading the way.

Adidas and its fiercest rival Nike have both invested heavily in efforts to capitalize on a summer of high-profile sporting events, including the Paris Olympics as well as European and South American soccer championships. Adidas’ marketing spend rose 15% in the quarter, driven by large-scale activations around major sporting events as well as new product launches.

The company did not quantify the benefits of the soccer tournaments, which ended earlier this month, but noted huge interest from fans. Apparel sales were boosted throughout the quarter by the championship-related jerseys, whose winners Spain and Argentina were both sponsored by Adidas.

“We now look forward to seeing this continue with the big Olympics in Paris. The start has been sensational,” said chief executive Bjorn Gulden, adding that he sees increased sentiment for the brand globally.

Inventories fell by 1 billion euros a year, the company said. Like other sporting goods names, Adidas has recently faced high inventories, particularly in North America, which have acted as a cap on revenue. Better inventory management “represents a healthy foundation to support future top-line growth,” Adidas said.

Along with challenges in the sector, the company has been in transition after ending its successful deal with rapper Kanye West, known as Ye, in 2022 following the artist’s spate of erratic behavior and anti-Semitic comments. Adidas partnered with Ye in 2013 to design Yeezy-branded sneakers, and severing ties with the rapper and the lucrative label hurt the company’s profitability. The disaster weighed heavily on Adidas’ financial performance last year and decimated its share price, with the company admitting it needed to regain confidence among retailers. The stock has rebounded this year, rising more than 30% since January.

“Adidas is undergoing some pretty significant changes behind the scenes,” RBC Capital Markets analyst Piral Dadhania said in a note to clients.

The company’s improvement contrasts with US Nike, which in June warned it expected to post lower sales for the fiscal year. Nike cited weaker consumer trends, particularly in China.

Adidas sales in Europe rose by double digits in the second quarter, while in China they were up almost 10%. But the company saw a decline in North American sales due to significantly lower Yeezy business.

The company decided to sell off its remaining Yeezy inventory rather than write it off, although that revenue stream still lags behind the label’s previous year’s revenue, the company said. Quarterly operating profit doubled from a year earlier to 346 million euros, with remaining Yeezy stock contributing about 50 million euros, Adidas said.

Adidas has stood by its guidance for 2024, which it has updated twice since the start of the year. It aims for single-digit sales growth and an operating profit of around €1 billion. In the medium term, Adidas hopes to achieve an operating margin of 10%, up from 5.9% in the last quarter.

“Enhanced brand momentum with our consumers happened faster than we expected,” Gulden said.

The company’s initial targets for the year, set in January, looked low and left room for upgrades, Stifel analysts said in a research note at the time.

“Gulden has consistently exceeded expectations to be able to hit and lift,” they said.

Write to Andrea Figueras at [email protected]

(End) Dow Jones Newswires

July 31, 2024 05:07 ET (09:07 GMT)

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