In an unscheduled announcement, Adidas AG (OTC:ADDYY) (OTC:ADDDF) raised its 2024 profit outlook after a better than expected first quarter. The good news come a month after the German sportswear giant posted its first annual loss in more than three decades and warned sales in North America will fall again due to the struggle of U.S. retailers with high inventory levels. Adidas has also been battling to restore its vitality after a costly split from Kanye West in October 2022 and suspending sales of the highly profitable Yeezy sneaker line.
Adidas Provided Hope Of Recovery
The German sportswear giant now expects full-year operating profit of about $744 million or 700 million euros , after previously guiding for 500 million euros.
At the very least, Adidas shares have staged a recovery, outperforming even Nike Inc (NYSE:NKE) since the new CEO Bjorn Guldentook over. Gulden found that 2023 ended better than what was expected at the beginning of the year, although this performance is certainly not good enough. Back in March, Gulden warned that the brand’s weakness in North America will continue as Adidas expects sales to fall by around 5% this year due to overstocked stores and lower demand. In 2023, Adidas recorded a YoY sales drop of 16% in North America, while fourth quarter alone posted a 21% YoY drop. But, throughout the year, Gulden has been clearing the stock through outlet stores and lowered inventories by 24% or 1.5 billion euros. Adidas is hoping to restore its market share from rivals like Nike, even as consumers' overall appetite for sportswear is declining, with even Nike shedding 2% of its workforce in February. Therefore, the latest announcement provided the much-needed good news for the German sportswear giant as Gulden's efforts to re-energize the company have started to pay off.
Nike is missing its bold and disruptive innovation.
Last Friday, Nike CEO John Donahoe blamed remote work for the slowdown of innovation that is the DNA of Nike’s brand. With employees working from home for more than two years now, developing a boldly disruptive product is tough to develop through Zoom. But Donahoe assured that Nike’s innovation pipeline is as strong as ever as the sports company fights to protecting its market share with its restructuring plan announced in December. Over the next three years, Nike aims to lower costs by about $2 billion as it embraces for softer demand in the quarters ahead.
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