According to Adidas, this growth was driven by a strong double-digit increase in full-price sales as adidas continues to focus on reducing discounting activity and improving the overall business mix on its own online platforms. Credit: Photograph by Jason Alden/Bloomberg via Getty Images

adidas said it has experienced a “promising start” to Q1 FY24 having emerged as a top choice for shoppers seeking fashionable trainers over the past few months, with its revenues propelled by the popularity of its lifestyle footwear.

Adidas Q1 results overview

  • Net sales increased 3.5% from €5.27bn to €5.46bn.
  • Gross profit was up by 18.3% from €2.36bn to €2.8bn.
  • Operating profit amounted to €336m, an increase of 458.4%, as opposed to last quarter’s €60m.
  • Net income from continued operations was €171m vs a net loss of €24m in the previous quarter.

Adidas reported an 8% increase on currency-neutral revenues during the first quarter (Q1) of 2024 in a detailed report following its preliminary results publication.

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Footwear revenues reportedly grew by 13% on currency-neutral basis, driven by strong brand momentum, particularly in the Originals and Football categories. Apparel sales were up 2% in Q1.

Adidas noted that high apparel inventories, particularly in the North American marketplace, still led to lower sell-in into the Wholesale channel as apparel growth was seen to be lower than growth in footwear.

Lifestyle revenues were up “strong double digits” during the quarter. Adidas said it continued to fuel the demand for its highly popular Samba, Gazelle, Spezial,
and Campus franchises.

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Top-line development was driven by the brand’s Direct-to-Consumer (DTC) business, which grew 20% on a currency-neutral basis during the quarter. Sales in Adidas’ own retail stores increased 11%, which it believes reflects strong double-digit growth across the company’s full-price concept store fleet. E-commerce revenues grew 34% in Q1. Adidas has been focused on reducing discounting activity and improving the overall business mix on its own online platforms. Sales also benefited from a spike in Yeezy sales.

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Geographically, Adidas was quick to point out that it experienced strong growth in all markets except North America where revenues fell 4% on the back of a ” continued disciplined sell-in approach”. Europe saw a 14% increase in currency-neutral sales, while revenues in emerging markets and Latin America also grew by 17 and 18% respectively. Sales in Greater China were up 8%. Following the same trend, Japan/South Korea posted revenue growth of 7%.

What the analysts say

While Adidas warns unfavourable currency effects are projected to weigh significantly on the brand’s profitability in 2024, it has provided a fairly upbeat outlook whereby it expects currency-neutral revenues to increase at a mid- to high-single-digit rate in 2024 as opposed to the previous guidance of a mid-single-digit rate increase and operating profit to come in at €700m from €500m anticipated earlier.

But GlobalData’s associate apparel analyst Alice Price believes that Adidas is not “out of the woods” just yet and acknowledges its core proposition still leaves a lot to be desired.

She suggests the brand should now place significant focus on this segment to make its products more fashionable and invest in innovation to stand out within the performance sportswear market.

Price continued: “The brand saw strong demand for its higher end running, football and basketball products across all categories, including a successful launch of its football shirts ahead of the UEFA Euros. Adidas has also placed a sharp focus on its running footwear to fend off disrupters like HOKA and On Running, with its Adizero Adios Pro Evo 1 and Adizero Prime X 2 Strung gaining particular attention. These styles, alongside its lifestyle footwear, which includes its Samba, Gazelle, Spezial, and Campus styles, drove its footwear division’s currency-neutral revenue to increase by 13%.”

She further added that North America continues to be Adidas’ “Achilles heel,” with revenue declining 3.6% during the quarter, driven by a double-digit decline in its wholesale channel.

“Adidas continues to adopt a conservative sell-in approach as consumer appetite remains dampened amid ongoing high inflation,” she concluded.