Shares in Adidas rose more than 7% on Wednesday, hitting their highest level in over two years after the German sportswear giant on Tuesday reported better-than-expected quarterly results and raised its 2024 guidance on stronger momentum.
Growth is being driven by strong demand momentum in "terrace" retro styles, such as Samba, Gazelle and Campus, as well as strength in performance categories, analysts at Wedbush said.
Analyst Cedric Lecasble at Stifel also highlighted that the raise in 2024 guidance "had little to do with Yeezy mechanics, but was much more driven by Adidas brand building materializing at full speed."
Adidas has been undergoing a turnaround after in October 2022 it cut ties with rapper West, who goes by Ye, suspending sales of the highly profitable Yeezy sneaker line.
It later resumed sales of Yeezy products under the lead of CEO Bjorn Gulden, in the job since the start of 2023, to clear remaining stock while seeking to boost its popular retro styles.
Lecasble described revenue performance in the first quarter as "impressive" in the context of challenging market conditions.
Analysts however view Adidas' guidance for operating profit (EBIT) of 700 million euros as still conservative.
Given that consensus already estimates the figure at around 890 million euros for 2024, RBC analyst Piral Dadhania pointed out, "the market clearly does not believe the EBIT guide, which to us appears to be unrealistic, and overly conservative."
Adidas delivered a quarterly EBIT of 336 million euros.
The company said it sold another 150 million euros worth of Yeezy products in the past quarter, for an operating profit of around 50 million euros. It, however, expects no further profit contribution from the remainder of Yeezy inventory, which it anticipated to sell for about 200 million euros later this year.
Shares were up 6% by 09:49 GMT, topping pan-European STOXX 600 index.
