Shares in adidas AG (OTCQX:ADDYY) sprinted up almost 8% to a two-year high of €218 as the sportswear group beat expectations for the first quarter and upped its full-year guidance.
Revenues increased 8% versus the prior year level, the German giant said in an ad-hoc statement released overnight, with the top line up 4% in euro terms at €5.5 billion.
Gross profit margin improved 6.4 percentage points to 51.2% during the quarter, up from 44.8% a year ago, with operating profit swelling to €336 million in the quarter compared to €60 million this time last year.
Analysts said the most impressive news was the 5% growth for the Adidas brand, excluding the winding down Yeezy partnership, which added around €150 million of revenue.
Growth was driven by lifestyle supported by strongly building 'terrace trainer' footwear such as the Samba (Rishi Sunak's favourite trainer), Gazelle and other old-school models like Campus etc.
Adidas management said the better-than-expected performance during the quarter meant it is increasing full-year revenue guidance to "mid- to high-single-digit" percentage growth in 2024 up from just "mid-single-digit" before, with operating profit now expected to reach around €700 million up from prior guide of around €500 million.
"As largely expected, ADS' cautiously struck guidance needed refreshing," said analysts at Jefferies.
The performance of the non-Yeezy Adidas sales was "the most welcome news for shareholders ... confirming that the resonance of the brand in lifestyle is as strong as suspected", they added.
Stifel analysts said the new guidance is "more constructive on top line than on EBIT" and estimates the first-quarter beat "only explains half of the underlying FY24 top line guide rise".
As first-quarter EBIT historically accounted for around a third of the full year, pre-Covid, this rule of thumb would lead to EBIT "in the region of €1 billion," the Stifel team said, which compares to the current consensus forecast of €884 million.