© Reuters. Adidas (ADDYY) gains as Yeezy clearance fuels beat-and-raise Q2; Two analysts upgrade
Adidas (OTC:) shares are trading higher in Frankfurt on Tuesday after the sports retailer reported preliminary Q2 results that topped analyst expectations.
The company expects to see its revenue fall 5% in Q2 to €5.34 billion ($5.91B), higher than the expected €5.06B. The operating profit is seen at €176 million, according to preliminary results.
Adidas also boosted its full-year forecast as it now expects the potential write-off of the remaining Yeezy inventory to be €400M, better than the €500M initially projected.
The FY operating loss is now seen at €450M, compared to the prior forecast of €700M. FY revenue is forecast to fall by a mid-single percentage digit at constant currency, against a previous expectation of a high-single-digit fall.
Analysts weighed in positively on Adidas’ preliminary results release. Société Générale and Exane BNP Paribas upgraded their ratings to Buy and Outperform, respectively.
“While 2022 was a year to forget, marked by brand-specific revenue and margin pressures, it ended on a positive note with the appointment of Bjorn Gulden as CEO, coming from key competitor Puma. 2023 is a year of transition with focus on simplifying and restructuring the organisation, rebuilding brand desirability and reducing excess inventories, yet revenue and profit guidance is potentially conservative,” Citi analysts said in a note.
Stifel analysts added that the company’s “cautious guide-and-beat communication strategy continues.”
“The new FY23 guidance looks highly conservative in context of strong odds of new successful Yeezy drops. But Yeezy should not capture too much attention as inventory will be either sold or written off by end-24. Underlying trends are much more critical,” they added.
Adidas is due to report the full Q2 earnings on August 3.
