Adidas soars on strong Q1 and outlook upgrade, beats analyst expectations

Adidas stock price: Shares in Adidas (ADSGn.DE) surged over 7 per cent on Wednesday, reaching their highest point in more than two years. This rally comes after the sportswear giant reported better-than-expected first-quarter results on Tuesday and subsequently raised its full-year 2024 guidance.

Analysts attribute the strong performance to a surge in demand for "terrace" retro styles like Samba, Gazelle, and Campus, as well as continued strength in performance categories.  Wedbush analysts specifically highlighted this trend.

Stifel analyst Cedric Lecasble stressed a key takeaway: the guidance increase wasn't primarily driven by Yeezy sales.  Instead, it reflects the successful growth of the core Adidas brand, signifying the company's turnaround efforts are materialising.

This news comes after a period of transition for Adidas. In October 2022, the company severed ties with rapper Ye (formerly Kanye West), leading to the suspension of the lucrative Yeezy sneaker line sales.  Under CEO Bjorn Gulden, who started in 2023, Adidas resumed selling the remaining Yeezy stock while prioritising its popular retro styles.

Lecasble commended Adidas' first-quarter revenue performance, particularly considering current market difficulties.  However, some analysts see room for further growth in the company's outlook.

Conservative EBIT guidance

Analysts consider Adidas' projected operating profit (EBIT) of €700 million for 2024 to be conservative. This figure contrasts with the current consensus estimate of around €890 million. As RBC analyst Piral Dadhania points out, "the market clearly does not believe the EBIT guide, which to us appears to be unrealistic and overly conservative."  It's worth noting that Adidas delivered an EBIT of €336 million in the first quarter.

Yeezy inventory and future expectations

Adidas reported additional Yeezy product sales of €150 million in the past quarter, generating an operating profit of around €50 million. However, the company anticipates no further profits from the remaining Yeezy inventory, which is valued at €200 million and expected to be sold later this year.

The positive news propelled Adidas shares up 6 per cent by 09:49 GMT, outperforming the broader pan-European STOXX 600 index.

(With Reuters inputs.)