TOP NEWS: Adidas raises annual guidance but warns of currency effects

(Alliance News) - Adidas AG on Tuesday raised its full-year guidance after seeing progress in its second quarter, but warned that currency effects continue to act as a drag.

In preliminary figures, the Herzogenaurach, Germany-based sporting goods manufacturer said revenue grew 9.0% year-on-year in the second quarter to EUR5.82 billion from EUR5.34 billion - an 11% increase in currency neutral revenue.

Excluding Yeezy sales, currency neutral revenue rose 16% from a year before.

Adidas said its gross margin edged down to 50.8% from 50.9% a year before, but saw a strong improvement on an underlying basis. It attributes this to "better sell-throughs, reduced discounting, lower sourcing costs and a more favorable category mix".

The German firm reiterated that currency effects will "weigh significantly" on its profitability over 2024, having impeded reported revenue and gross margin development over the first half.

More positively, the sportswear company increased its full-year guidance, now expecting currency-neutral revenue to see a high-single-digit rise, compared to mid-to-high single digit previously. Operating profit is now expected to be around EUR1.0 billion, compared to prior forecasts of around EUR700 million.

The new guidance assumes additional sales of around EUR150 million of its remaining Yeezy inventory, which would average out to be at cost.

It saw an operating profit of EUR268 million in 2023, which was a sharp fall from the EUR669 million in 2022. However, it was significantly better than the EUR700 million loss that had been expected, in the wake of cutting ties with rapper Kanye West following his antisemitic remarks.

Shares in adidas had closed down 1.2% at EUR228.70 each in Frankfurt on Tuesday, prior to the announcement.

By Elizabeth Winter, Alliance News deputy news editor, Global services

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