adidas AG (ADDDF) Q3 2024 Earnings Call Highlights: Strong Growth and Strategic Investments ...

GuruFocus News
3 min read

In This Article:

  • Revenue Growth: 10.3% currency-neutral growth; 14% growth excluding YEEZY.

  • Gross Margin: 51.3%, higher than YEEZY's margin.

  • EBIT: EUR598 million, up almost 50% from last year.

  • EBIT Margin: 9.3%.

  • Net Income: EUR469 million.

  • Earnings Per Share: EUR2.44, up 75%.

  • Regional Performance: Europe +18%, China +8%, Japan and South Korea +17%, LatAm +30%.

  • Wholesale Growth: 13% increase.

  • Own Retail Growth: 15% increase.

  • E-commerce Performance: -3% overall, but +25% excluding YEEZY.

  • Operating Working Capital: 20.6%.

  • Cash and Cash Equivalents: EUR1.8 billion.

  • Net Leverage Ratio: Improved to almost below two times.

  • Inventory: EUR50 million YEEZY inventory remaining, expected to reach zero soon.

Release Date: October 29, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Adidas AG (ADDDF) reported a strong Q3 2024 with a currency-neutral sales growth of 10.3%, and 14% growth excluding YEEZY.

  • The company achieved a healthy gross margin of 51.3%, marking the first time the Adidas business had a higher margin than YEEZY.

  • EBIT increased by almost 50% year-over-year to EUR598 million, with an EBIT margin of 9.3%, close to the midterm target of 10%.

  • Adidas AG (ADDDF) experienced strong regional growth, particularly in Europe (18% growth) and Latin America (30% growth).

  • The company is expanding its retail footprint with new store concepts, including women's stores and flagship locations, indicating a strategic investment in direct-to-consumer channels.

Negative Points

  • Despite the positive growth, Adidas AG (ADDDF) continues to face challenges in the North American market, with only slight growth in the Adidas business.

  • The company is still heavily investing in sales and marketing, which may not yet provide the expected leverage.

  • Adidas AG (ADDDF) reported a decline in e-commerce sales by 3%, although the underlying business excluding YEEZY was up 25%.

  • The financial expenses have been impacted by hyperinflation adjustments in Argentina and Turkey, although they have normalized compared to last year.

  • The company is still dealing with the remaining YEEZY inventory, which is expected to contribute EUR0 in profit for Q4.

Q & A Highlights

Q: Can you comment on your ability to maintain the current underlying top line growth over the next four to six quarters? A: We expect to continue growing around 10% double-digit in the future. There might be differences in categories, channels, and markets, but our goal is to maintain momentum. We believe we have the resources to achieve this without negatively impacting profitability. (Bjorn Gulden, CEO)

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