Adidas has reported better-than-expected results for the first quarter of 2024, driven by the brand’s impressive momentum. The company witnessed significant growth in all regions except North America, leading to an 8 percent increase in currency-neutral sales.
The positive performance can be attributed to various factors, including a double-digit growth in direct-to-consumer (DTC) sales, indicating strong sell-through for Adidas products.
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Additionally, the company’s gross margin improved by 6.4 percentage points to 51.2 percent, thanks to healthier inventory levels, reduced discounting and lower sourcing costs.. These improvements resulted in an operating profit of EUR336 million, a substantial increase compared to EUR60 million during the same period last year.
The company’s positive performance in the first quarter led to an upgrade in its top- and bottom-line guidance on April 16. This success sets a promising tone for the rest of the year.
Currency-neutral revenue growth was a key driver of Adidas’ impressive results in the first quarter. The underlying Adidas business experienced a solid 5 percent growth, while the sale of remaining Yeezy inventory generated approximately EUR150 million in revenue.
Adidas CEO Bjørn Gulden noted: “I am very happy to see that the business in Q1 developed better than we had expected. […] The growth is of course driven by our Lifestyle business right now, especially Originals footwear, but we also see that the higher end of our Running, Football and Basketball product is doing well. The demand for our footwear franchises Samba, Gazelle, Spezial, and Campus is still very strong and growing, but we also see new franchises like SL72 starting to become high in demand. We feel we have a very strong pipeline of product for the next quarters.”
Footwear revenues were particularly strong, growing by 13 percent in currency-neutral terms.
This growth was fuelled by the remarkable momentum of the Originals and Football categories. Apparel sales, on the other hand, saw a 2 percent increase in the first quarter, with lower growth compared to footwear.
The North American market, in particular, experienced lower sell-in due to high apparel inventories.
Lifestyle revenues also exhibited strong double-digit growth during the quarter, driven by popular franchises like Samba, Gazelle, Spezial, and Campus. Adidas further extended its success in the Terrace category into Running with the successful introduction of the SL72.
Direct-to-consumer (DTC) sales and e-commerce were significant contributors to Adidas’ overall growth. DTC sales grew by 20 percent in currency-neutral terms, with sales in Adidas’ own retail stores increasing by 11 percent. E-commerce revenues surged by 34 percent in the first quarter, driven not only by the sale of Yeezy products but also by strong growth across Adidas’ digital platforms. This growth was supported by increased full-price sales, as the company focused on reducing discounting and improving the business mix on its online platforms.
On the wholesale front, currency-neutral sales increased by 2 percent, with double-digit growth in Europe, Emerging Markets, and Greater China, offset by a decline in North America.
Adidas reported a net income from continuing operations of EUR171 million, a substantial improvement compared to a net loss of EUR24 million in the same period last year.
Building on the strong start to the year, Adidas has raised its full-year financial guidance and now expects currency-neutral revenues to increase at a mid- to high-single-digit rate in 2024, compared to the previous expectation of a mid-single-digit increase.
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“The markets are still volatile and not easy, but we feel we are making progress everywhere. The increased brand heat and the improved sell-through is supporting us in building better relationships with our retail partners and it buys us time to continue to invest in making Adidas again a better brand and company,” added Gulden.
“We will continue to ‘over invest’ into the product, into the brand, into sales and marketing to ensure continued growth.”