Adidas raises annual forecast again: On track for success under CEO Gulden

Adidas has raised its annual forecast for the second time in three months—a clear sign that CEO Bjørn Gulden's transformation plan is gaining momentum. The sporting goods company now expects an operating profit of one billion euros for the full year, up from the previously forecasted 700 million euros. Currency-neutral sales are anticipated to increase by a high single-digit percentage, rather than the previously expected mid to high single-digit range. Under the leadership of Gulden, who was poached from Puma at the beginning of 2023, Adidas has expanded sales channels through independent retailers and reduced direct-to-consumer engagements. This has particularly boosted the popularity of Adidas sneakers like Samba and Gazelle. On Tuesday, the brand reported strong sales to retailers, fewer discount campaigns, lower sourcing costs, and a more favorable product category mix. However, the company warned that currency fluctuations would significantly impact profitability in 2024. This positive news comes shortly after larger competitor Nike unsettled investors with a pessimistic outlook and just days after the Adidas-sponsored Spanish team defeated the Nike-sponsored English team in the Euro 2024 final in Berlin. Throughout this year, Adidas shares have significantly outperformed Nike. While the German brand's stock has risen by more than 25 percent since January, Nike has lost 33 percent over the same period. Additionally, Adidas presented better-than-expected results for the second quarter. Sales, excluding the now-discontinued Yeezy brand, grew by 16 percent year-over-year to 346 million euros. This was well above analysts' expectations of 266 million euros and represented a doubling compared to the previous year. At the beginning of the year, Gulden announced the postponement of leading sneaker model launches to avoid jeopardizing the company's success. The negative impacts of the decision to terminate the partnership with US rapper and fashion designer Kanye West over antisemitic comments made in late 2022 have also subsided, as Adidas has cleared much of the unsold Yeezy inventory. Adidas expects to sell the remaining Yeezy stock by the end of the year, potentially generating additional revenues of 150 million euros, without expecting further profit contributions. The company had previously announced plans to donate part of the proceeds to charity. In the second quarter, Yeezy sales contributed 50 million euros to operating profit. Following weak sales in China due to Covid-19 lockdowns and anti-western consumer boycotts, the market has recently shown signs of recovery. Last month, Adidas announced the termination of two employees in China due to violations discovered in an embezzlement investigation. Adidas will release detailed quarterly results on July 31.