By Pierre Bertrand


Adidas upgraded its sales and earnings guidance for the year after posting better-than-expected results for the second quarter as customers bought more products despite less promotional activity.

The German shoe and sportswear company said it now expects currency-neutral revenue to increase at a high single-digit rate this year, compared with a mid-to-high single-digit rate previously. Meanwhile, it said it also expects roughly 1 billion euros ($1.09 billion) in operating profit, up from a previous forecast of around EUR700 million.

The guidance boost comes after Adidas said revenue grew 9% in the second quarter to EUR5.82 billion, citing preliminary figures. On a currency-neutral basis, revenue grew 11% on year.

The company said its underlying gross margin in the quarter had strongly improved, reflecting what it said were better sales across categories, reduced discounting and lower sourcing costs. Adidas's reported gross margin, however, slipped to 50.8% from 50.9% a year earlier due to what the group said were unfavorable currency effects.

Unfavorable currency effects will continue to weigh significantly on profitability this year, and also harm revenue and the gross margin, the group said, adding that its first half was particularly hard-hit.

Operating profit in the quarter grew to EUR346 million from EUR176 million a year prior, with the remaining Yeezy inventory contributing around EUR50 million. Adidas has been working on selling down its inventory of Yeezy brand items after the collapse of its deal with rapper Kanye West.

Adidas estimates the remaining Yeezy inventory could generate about EUR150 million in additional sales this year.

Adidas will report its half-year result on July 31.


Write to Pierre Bertrand at pierre.bertrand@wsj.com


(END) Dow Jones Newswires

07-16-24 1320ET