Adidas Lifts Profit Target Again Amid Retro Sneaker Demand

In a move that underscores its strong recovery trajectory, Adidas has raised its annual profit target for the third consecutive quarter. This adjustment comes as the brand capitalizes on a rising consumer appetite for retro sneakers, particularly the Samba, and continues to sell off its Shui Yee stockpile. CEO Bjørn Gulden has employed a strategic overhaul focusing on innovation and a return to core athletic products, setting the stage for a brighter financial outlook.

Adidas now forecasts an operating profit of approximately €1.2 billion ($1.3 billion), marking a substantial increase from previous estimates of around €1 billion. This optimistic projection comes amidst an anticipated 10% rise in currency-neutral revenue for 2024, which exceeds earlier expectations of a high single-digit growth rate. This shift in forecast reflects a renewed consumer sentiment, particularly within the lifestyle shoe segment where innovation has paid off handsomely. Analyst Poonam Goyal of Bloomberg Intelligence noted that the company has been experiencing improved consumer spending and enthusiasm for its brand offerings.

Despite a slight 2% dip in share value following the announcement, Adidas shares have surged by 27% this year, positioning the brand favorably against competitor Nike Inc., which has reported a 24% decline in shares since January. The contrasting fortunes of these industry giants provide a vivid illustration of the changes within the sneaker market, with Adidas successfully earning the confidence of investors reliant on its more focused approach under Gulden’s leadership.

Since taking the helm in January 2023, Gulden has sought to bridge the gap with Nike, which remains dominant in the sneaker industry. His strategy hinges on simplifying Adidas’ offerings and reinvigorating its commitment to sports. The company’s commitment to returning to growth is especially significant following a troubling 2023 marked by the dissolution of its partnership with rapper Ye, which had significantly hampered its revenue streams.

A substantial part of Adidas’ current momentum can also be attributed to the successful movement of its dwindling inventory of Yeezy footwear. The company estimates an additional €50 million in fourth-quarter sales from Yeezy sneakers, albeit without expecting further profit contributions from this line. Thus, while the Yeezy brand posed a challenge, it now represents a potential solution to boost short-term revenues.

Classics such as the Samba, Spezial, and Campus are seeing sustained demand, with third-quarter revenues climbing 7% to €6.4 billion, aligning closely with analysts’ predictions. This trend indicates that retro and classic sneaker styles continue to resonate strongly with consumers, a factor that Adidas aims to leverage in their marketing and product strategies moving forward.

Moving ahead, Gulden faces the critical task of impressing both consumers and investors with new product launches that showcase the innovative edge of Adidas. An area of renewed focus is also on partnerships with retail stores, which had shifted their attention to emerging brands over the past few years. This is especially pertinent given that brands like On Holding AG and Hoka have gained traction while larger established players like Adidas and Nike expanded their own e-commerce platforms.

In contrast to Adidas’ resurgence, Nike has recently withdrawn its full-year sales guidance in light of its restructuring under new CEO Elliott Hill. This retreat from proactive financial forecasting highlights the volatility in the market and underscores the competitive landscape that Adidas now navigates with renewed vigor.

The turnaround strategy implemented by Bjørn Gulden is indeed an impressive comeback story. Initially facing a crisis after the terminate of the Yeezy collaboration, Adidas has made bold decisions to bring back classic styles and regain consumer trust. The emphasis on athlete sponsorships, classic product lines, and innovation seems to be fostering an environment where Adidas can thrive substantially in the retail space.

As we move into 2024, industry watchers and investors alike will be eager to see how effectively Adidas can maintain this momentum and continue to innovate within a market that has become increasingly competitive. Adidas’ strategy of returning to its roots while managing its inventory effectively could well mark the dawn of a new prosperous era for this iconic sportswear brand.

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