Driven by the boom of global sports events, Adidas' performance in the first half of the year exceeded expectations, and the performance of Greater China achieved "five consecutive increases".
On July 31, local time, Adidas released its financial results for the second quarter and first half of 2024 as of June 30, and the results for the first half of the year exceeded expectations. In the second quarter of this year, Adidas achieved global revenue of 5.822 billion euros, a year-on-year increase of 8.9%; Operating profit reached 346 million euros, up 96.7% year-on-year. The net profit attributable to the parent company was 190 million yuan, an increase of 125.8% year-on-year, and the gross profit margin increased to 50.8%.
Adidas' Q2 financial data
In the first half of this year, Adidas achieved global revenue of 11.280 billion euros, a year-on-year increase of 6.2%; Operating profit amounted to 682 million euros, up 188.8 percent year-on-year. Net profit attributable to the parent company was 360 million euros, an increase of 701.3% year-on-year. The company's gross profit margin increased by 3.2 percentage points to 51%.
Adidas' financial data for the first half of the year
Adidas Global CEO Gulden said in the financial report that consumers and retail partners responded positively to Adidas' marketing activities and products in the second quarter, "We have seen Adidas' global brand popularity and attractiveness continue to increase, sports fashion and sports performance products sales continue to grow, and footwear and apparel products have achieved excellent sales performance." ”
Goulden also said, "I believe we can make Adidas a strong and healthy company again." To achieve this goal, we will strive to continue double-digit growth and improve profitability. Despite external challenges, our medium-term EBIT margin target of 10 percent is achievable. ”
As of July 30, local time, Adidas' share price was 237 euros per share, an increase of 0.17%, and it has risen by more than 28% this year. In contrast, Nike, which is also a sports brand giant, has lost more than 30% of its share price so far this year.
In the first half of the year, Adidas exceeded expectations and raised its full-year guidance
Driven by the boom of the three global sports events of the European Cup, the America's Cup and the Paris Olympics, adidas delivered a "report card" that exceeded expectations in the first half of this year with the "two-wheel drive" of the two major businesses of sports performance and sports fashion, and the sales of the Adidas brand achieved double-digit growth in all channels and growth in all markets.
In terms of specific categories, Adidas footwear products performed strongly in the second quarter, with footwear revenue increasing by 17% year-on-year; Apparel revenue increased 6% year-over-year, driven by strong double-digit growth in football; Accessories revenue fell 8% in the quarter.
At the earnings call, Adidas executives introduced that 2.8 million European Cup jerseys and 2 million America's Cup jerseys were sold this year. Driven by sneakers, jerseys and other products, Adidas' sports performance business achieved double-digit growth in the second quarter of this year.
It is worth mentioning that with the football event driving football culture to the streets, the retro trend has further swept the world, and products represented by T-toe shoes such as Samba and Gazelle have been sought after by consumers, and the demand for retro running has been growing. The financial report also shows that in addition to returning to sports, Adidas' sports fashion business also achieved double-digit growth in the second quarter of this year. In addition, Adidas is starting to meet consumer demand at a wider range of price points by launching more sportswear franchises.
"There needs to be a balance between the fashion category and the professional category of sports brands. Overall, the fashion category will account for more than 50% will be one of the future trends. Yin He, head of consumer industry research at JPMorgan Chase & Co. in Asia, told The Paper that the fashion business can reach more and wider consumer groups, which is an important driver of the performance growth of sports brands. However, fashion has its uncertainty about popularity; Focusing too much on expanding the fashion business can lead to certain business risks. For sports brands, professional ability is the core of performance growth, and it is also the key to breaking through the bottleneck of performance.
From a channel perspective, potential revenue momentum expanded in the second quarter. Excluding currency effects, wholesale channel revenue increased 17% year-over-year. Direct-to-consumer (DTC) revenue increased 4% year-over-year. Excluding Yeezy, DTC grew 21% year-over-year. Excluding Yeezy, e-commerce revenue increased by more than 30% year-on-year in the second quarter.
At the same time, based on effective inventory management, by the end of the first half of the year, Adidas' inventory decreased by 1 billion euros compared to the same period last year, a year-on-year decrease of 18%.
According to the announcement, based on better-than-expected second-quarter results, Adidas raised its full-year guidance for the full year. Adidas expects revenue growth in the high single-digit range in 2024, compared to mid-to-high-single-digit growth previously. The company expects full-year operating profit of around EUR 1 billion, compared to EUR 700 million previously.
In anticipation, Adidas assumes that the remaining Yeezy inventory for the remainder of the year will be sold at average cost, which will generate around €150 million in additional revenue, with no further profit contribution in the second half of 2024.
The sale of some of the remaining Yeezy inventory has contributed about 200 million euros to Adidas' revenue in the second quarter of this year, compared with about 400 million euros in the same period last year. In addition, it contributed around 50 million euros to the company's operating profit in the second quarter of this year, accounting for about 14 percent of total profit, compared to around 150 million euros in the same period last year. It should be noted that the highly profitable Yeezy footwear at its peak generated nearly half of Adidas' profits.
Yeezy brand products are known as "coconut shoes" in China and are designed by United States rapper and fashion designer Kanye West (hereinafter referred to as "Kanye"). The Yeezy series was once Kanye's proudest work, and coconut shoes have been extremely popular all over the world. However, after a series of anti-Semitic remarks by Kanye, Adidas terminated the cooperation agreement in October 2022, leaving sneakers worth around 1.2 billion euros in trouble. However, Adidas is also trying to turn things around, resuming sales of coconut shoes twice last year and plans to sell the remaining Yeezy products at least at cost price in 2024, bringing in about 250 million euros in sales.
Greater China's revenue increased by 8.5% year-on-year in the first half of the year, marking the fifth consecutive quarter of growth
While the global performance growth exceeded expectations, as one of the most important strategic markets for Adidas, Greater China performed well, with five consecutive quarters of "quality growth".
According to the financial report, in the second quarter of this year, Greater China achieved revenue of 822 million euros, a year-on-year increase of 9.3%. In the first half of this year, Greater China contributed revenue of 1.719 billion euros, an increase of 8.5% year-on-year.
The revenue in the second quarter of Greater China comes from Adidas' financial report
The revenue in the first half of Greater China comes from Adidas' financial report
This year marks Adidas' 27th year in China. According to the reporter's understanding, in the first half of this year, Adidas opened more than 100 new stores in China, and increased the proportion of "Made in China" to 75%.
In the post-earnings call, Gulden said, "We are pleased to see that the management team in China has reversed the previous headwinds in many ways. We will continue to adhere to the 'In China, For China' strategy, and further strengthen effective measures such as flexible supply chain upgrading and local creation, so as to respond more quickly to meet the needs of consumers." The China team is facing a challenging market, and we are pleased with the current performance of the Chinese market and remain optimistic about future growth. ”
Thanks to the "two-wheel drive" of the two major businesses of sports performance and sports fashion, the popularity of the adidas brand continues to rise. Citi pointed out in a recent research report that "in consumer research in Greater China, Adidas has become the sports brand with the highest purchase intent among consumers. HSBC research report said that Adidas with its product innovation and better market strategy, the global market share continues to grow, especially in emerging markets, and is optimistic about the company's future performance.