MW Adidas stock rallies to two-year high after lifting guidance
By Steve Goldstein
Adidas shares rallied on Wednesday as the athletics apparel maker continued its recent practice of pre-releasing results that were ahead of estimates.
Adidas (XE:ADS) late Tuesday upped its full year guidance, now expecting full-year operating profit of around EUR700 million, vs. guidance of around EUR500 million, on mid-to-high single-digit sales growth at constant currencies, vs. previous guidance of mid single-digits.
That's after first-quarter revenue growth of 4%, to EUR5.46 billion, and an operating profit of EUR336 million. Analysts had expected an operating profit of EUR143 million on flat sales.
Adidas said the latest Yeezy drop generated operating profit of EUR50 million on revenue of EUR150 million, and the company noted its guidance assumes it will sell the remaining Yeezy inventory, some EUR200 million in sales, at cost.
Adidas in 2022 ended its Kanye West partnership after antisemitic comments made by the rapper. The company in January decided not to write off its remaining inventory of Yeezy apparel that was made in collaboration with West.
Analysts at Stifel led by Cedric Lecasble said the first-quarter beat only explains half of the underlying improvement to the 2024 guidance. They added the Yeezy mechanics are "ultra-conservative."
Ahead of the pre-release, Morgan Stanley had lifted its rating on Adidas from underweight to overweight, citing appetite for lifestyle shoes and a signature basketball sneaker from NBA player Anthony Edwards.
Adidas shares rose as much as 7%, and have climbed 17% this year.
-Steve Goldstein
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April 17, 2024 04:17 ET (08:17 GMT)
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