Adidas Raises Annual Profit Bar After Yeezy Brand Aids Profit — Update

By David Sachs

Adidas raised its revenue and profit expectations after the controversial Yeezy brand contributed to a better-than-anticipated first quarter.

The German shoe and sports apparel company said Tuesday that it now expects operating profit to finish the year at around 700 million euros ($743.7 million) compared with its previous forecast of EUR500 million.

After terminating its contract with Yeezy namesake Kanye West last year, the company decided to sell the inventory rather than write it off. Adidas's release of Yeezy apparel generated revenue of about EUR150 million and an operating profit of around EUR50 million in the first quarter, the company said. Its remaining inventory will be sold at cost, contributing to revenue but not profit, the company said.

Adidas's upgrade came after first-quarter revenue rose 4% on year to EUR5.46 billion, above a Visible Alpha consensus of 3.1%. Its gross margin improved to 51% from 45% a year prior, while operating profit jumped to EUR336 million from EUR60 million.

Revenue adjusted for currency effects is now expected to grow at a rate in the mid-to-high single digits compared with previous expectations of mid-single-digit growth, the sportswear giant said.

Despite the results, Adidas still expects currency-exchange effects to constrain profitability, revenue and gross margin this year, it said.

Write to David Sachs at david.sachs@wsj.com

(END) Dow Jones Newswires

April 16, 2024 12:36 ET (16:36 GMT)

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