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In-depth Analysis of the Financial Growth of Adidas Group and Future Outlook
Sectors & Markets
26 May, 2024
Table of contents
Adidas Group released its first-quarter financial results for 2024 on April 30th 2024, detailing a notable improvement across key financial metrics. The report showcased an 8% increase in currency-neutral sales, driven by robust performance in all regions except North America. This is a significant recovery compared to the first quarter of 2023, where sales remained flat. The gross margin saw a substantial rise from 44,8% in Q1 2023 to 51,2% in Q1 2024, fueled by healthier inventory levels and a strategic reduction in discounting at Adidas.
Operating profit surged impressively to €336 million, a stark contrast to the €60 million recorded in the same period last year. This improvement was supported by strong direct-to-consumer (DTC) growth, which reflects a successful sell-through, indicating effective inventory management and fewer discounts. The notable decrease in inventories by over €1,2 billion further underscores the company’s efficient operations and proactive approach to managing supply chain dynamics.
In the first quarter of 2023, Adidas experienced mixed regional performance. Europe saw a modest revenue increase of 3,1% on a currency-neutral basis, reflecting a relatively stable market condition. However, North America and Greater China faced significant challenges, with revenue declines of 16,1% and 11,9% respectively, largely due to the discontinuation of the Yeezy brand and high inventory levels which impacted sales dynamics. Latin America and Asia-Pacific, on the other hand, showed strong growth, with increases of 42,6% and 12,0% respectively, driven by robust demand and effective market strategies.
Contrastingly, the first quarter of 2024 marked a significant improvement across almost all regions. Europe experienced a substantial revenue increase of 14,8%, driven by strong sell-through rates in both direct-to-consumer and wholesale channels. Latin America and Emerging Markets continued their robust performance with revenue growth of 17,6% and 16,8% respectively, capitalizing on strong market presence and consumer demand. Greater China also reversed its previous decline with an encouraging 7,8% increase. North America, while still facing challenges, showed signs of recovery with a smaller revenue decline of 3,6%, indicating a gradual stabilization in this key market. These improvements reflect a successful strategic realignment and targeted growth initiatives that have begun to yield positive outcomes across diverse global markets.
Looking forward, Adidas has raised its financial guidance for 2024, anticipating mid- to high-single-digit revenue growth. This positive revision reflects the company's confidence in its current trajectory and ongoing initiatives to enhance product offerings and marketing effectiveness. Adidas remains committed to leveraging its strong brand momentum, which is evident from the planned activities around major sports events such as Euro 2024 and Copa América.
The marked improvement in Adidas' financial performance from Q1 2023 to Q1 2024 can be attributed to several strategic adjustments, including better inventory management and an enhanced business mix that led to higher gross margins. The continued focus on high-demand product franchises and strategic marketing investments are likely to sustain revenue growth and operational efficiency. However, it's important for Adidas to maintain vigilance in its North American strategies, where sales have lagged slightly due to cautious wholesale approaches.
As Adidas progresses through 2024, monitoring the effectiveness of its marketing campaigns and product launches in light of potential economic fluctuations will be crucial. The company's ability to navigate currency impacts and global market dynamics will be key factors in achieving its revised profit targets and long-term success.
Read the full Adidas Group report Here.
Cover Image Courtesy: Adidas Beijing Store, Adidas Linkedin Page