Investing.com -- Shares of Adidas AG (ETR:ADSGN) rose on Tuesday following its third-quarter results, posting solid sales momentum and a strong underlying performance across most regions and channels, yet tempered by some challenges, including the absence of Yeezy-related income.
At 4:37 am (0837 GMT), Adidas (OTC:ADDYY) was trading 1.7% up at €217.50.
While Q3 sales reached €6.4 billion, reflecting a 10% growth adjusted for currency effects and 14% growth excluding the Yeezy impact, EBIT came in at €598 million, in line with preliminary estimates shared earlier by the company.
The gross margin held steady at 51.3%, indicating steady product and pricing management.
The EMEA region saw an impressive 18% growth, outpacing both consensus estimates. However, North America presented a notable weak spot, declining 7% compared to forecasts of 2% growth in consensus.
In Greater China, Adidas reported a 9% growth rate, which was marginally below the 11% anticipated by analysts, though it demonstrated continued recovery in a challenging market.
Emerging Markets delivered a 16% gain, while Latin America surged by 28%, each posting growth above consensus expectations and further underscoring Adidas’s strength in international markets outside of North America.
“Overall, we are encouraged by the financial progress at adidas, and expect a continuation of strong top-line trends to continue in 4Q24E and into FY25E,” said analysts at RBC (TSX:RY) Capital Markets in a note.
Performance by channel showed Adidas leveraging both wholesale and direct-to-consumer strategies effectively, particularly in its own retail stores, which experienced double-digit growth.
“Incrementally we learn that, channel-wise, wholesale outstripped DTC, which makes the 51.3% gm all the more impressive, and the elevated opex increase worthy of further scrutiny,” said analysts at Jefferies in a note.
Wholesale channels grew by 13%, and while DTC sales rose by 7%, growth excluding the Yeezy line impact was a robust 17%.
Adidas’s e-commerce operations also saw vigorous expansion, growing over 25% when adjusted for the Yeezy effect, driven in part by the brand’s concept store fleet, which recorded strong sellouts.
Looking ahead, Adidas reaffirmed its full-year 2024 guidance, aiming for around 10% currency-neutral sales growth, aligned closely with analysts’ consensus forecast of 11%.
The company maintained its EBIT target at €1.2 billion, which slightly edges out the consensus of €1.16 billion, with UBS estimates aligning at €1.20 billion.
However, investors are expected to keep a close eye on the upcoming management call for additional context on Adidas’s fourth-quarter and 2025 sales outlook, particularly as inventory build-up suggests the company is positioning to sustain double-digit growth in top-line sales.
Analysts at UBS noted that despite some one-off special items affecting results—such as a settlement cost with Ye (formerly known as Kanye West) offset by other operating income—these did not materially alter the earnings picture.
However, with the macroeconomic landscape remaining uncertain, investors may be cautious about possible headwinds, especially given Adidas’s exposure to foreign exchange risks, notably in the USD-Euro exchange rate dynamics, and the broader sensitivity of the sportswear industry to economic cycles and global supply chains.
Adidas’s positioning as the second-largest global sportswear brand after Nike (NYSE:NKE), with a strong foothold in both lifestyle and performance markets, remains a key strength, especially as it leans into footwear, which accounts for over half of its sales.
With GBL as a significant shareholder, holding an 8% stake, Adidas’s ongoing commitment to its growth targets and strategic investments in key regions suggest a positive trajectory heading into the next year.
“We presume that in the immediate future part of the investor base will remain focused on a context of ongoing neutral earnings revision momentum as an impediment for futher ST multiples expansion,” Jefferies said.