Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Currency-neutral sales increased by 11%, with underlying business up 16%, surpassing expectations.
- Gross margin improved by 150 basis points to 50.8%, indicating strong profitability.
- EBIT nearly doubled to EUR 346 million, reflecting positive financial performance.
- Strong performance in Europe with a 19% total increase and 24% in underlying business.
- Positive developments in key markets like China, Japan, South Korea, and Latin America, showing robust growth.
Negative Points
- North America experienced an 8% decline in total business, highlighting regional challenges.
- E-commerce sales were down by 6%, impacted by previous high sales through e-commerce channels.
- Accessories segment saw an 8% decline, attributed to one-time factors and lack of prioritization.
- High marketing expenses, with EUR 90 million more spent compared to last year, impacting overall profitability.
- Continued FX headwinds expected to affect both top line and gross margin in the second half of the year.
Q & A Highlights
Q: Can you give us an idea of whether a mid-teens underlying momentum is something that we could reasonably assume for Q3?
A: The demand will be very strong in the second half, but supply constraints may limit growth. We expect double-digit growth in the second half, but it may not be as high as Q2 due to supply limitations and strategic management of certain franchises.
Q: How would you characterize Adidas' positioning and brand heat in China at the moment?
A: Adidas is growing 9% in China, taking market share in a challenging environment. The local team has shown strong energy and initiatives to improve the business model, focusing on a more local-for-local approach and better in-season reactions.
Q: How prepared is Adidas for potential tariffs in the US, and how much of what you sell in the US comes from Chinese manufacturers?
A: Adidas has minimized sourcing from China for the US market, so we are well-prepared for potential tariffs. The supply chain plans for the US do not involve China.
Q: Could you confirm that apparel sales were up in Q2 excluding jersey sales?
A: Yes, apparel sales were up in Q2. The interest in apparel from retail partners and consumers is growing, and we are seeing an increase in the order book for apparel.
Q: Do you feel that you have the right product architecture in place to continue growing the running category?
A: Yes, we believe we have the right product architecture with models like Adistar, Supernova, and Ultraboost 5. However, we need to build relationships and distribution over time, so growth will be gradual.
Q: Can you help us understand what's going on in North America in terms of the behavior of wholesale partners?
A: Retailers are working through excess inventory and are now more interested in new, fresh inventory. Our relationships with American retailers are improving, and we are focusing on being more American in America, including visibility in American sports.
Q: Could you comment on the current trading in July and whether there has been any negative impact from the SL72 marketing campaign?
A: Current trading is good, and the SL72 marketing campaign has had no negative impact on brand momentum or sell-through rates.
Q: How should we think about the growth rates for wholesale and DTC channels going forward?
A: Wholesale growth is expected to be strong due to a solid order book. DTC growth will depend on like-for-like performance, which has been very strong in concept stores. We are confident in continued growth but will manage supply carefully.
Q: Are you confident in achieving double-digit growth in the second half of the year?
A: Yes, we are confident in achieving double-digit growth in the second half. Some orders meant for Q3 were delivered in Q2, but the demand remains strong.
Q: Could you comment on the impact of extra shipments on gross margin in Q2?
A: There were extra costs due to high demand and supply chain issues, including the situation in the Red Sea. These costs are factored into our calculations, and we aim to manage them effectively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
