Adidas rises with enthusiasm after improving forecasts for the 2024 financial year

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The actions of adidas they skyrocket in the German stock market. The textile multinational has risen 8.59% after announcing the preliminary results for the first quarter of 2024which showed that the period has been better than expectedand, above all, increase forecasts for the current fiscal year. The German firm has indicated that Revenues increased by 4%, up to 5,458 million euros compared to the 5,274 million euros achieved a year ago. Likewise, The company's gross margin improved 6.4 percentage points to 51.2% during the quarter (44.8% in the first quarter of last year) andOperating profit reached 336 million euros in the first quarter, almost 6 times more than the 60 million registered between January and March 2023. Consequently, the company has increased its forecasts for the entire year. Now, Adidas now expects currency-neutral revenue to grow at a mid- to high-single-digit rate in 2024 versus a previous forecast of mid-single digits. In addition, the company expects the company's operating profit to reach a level of around 700 million euros, 200 million more than its previous forecast. However, Adidas continues to hope that unfavorable currency effects «weigh significantly» on profitability of the company this 2024. «These effects are expected to continue to negatively affect both the declared income and the evolution of the gross margin in 2024,» they add. On the other hand, the textile multinational has detailed that the 'Yeezy'the brand developed in collaboration with the rapper Kanye west, generated revenues of around 150 million euros and an operating profit of around 50 million euros in the first quarter. adidas ended his association with Kanye West in 2022 after the rapper's anti-Semitic comments. In January, the company decided not to write off the remaining inventory of Yeezy clothing made in collaboration with West. «In its forecasts, the company assumes that The sale of the remaining Yeezy inventory during the rest of the year will occur on average at cost. This would mean some additional sales of around 200 million euros and no additional contribution to profit for the rest of the year,» explains Adidas. The breaking of the contract with the controversial artist has been a problem in recent times for the company, which reported a burden of around 500 million euros in its latest annual results.
Deutsche Bank analysts believe that the German brand has presented «better than expected» figures, although its forecasts remain below consensus expectations. The German bank maintains its 'buy' recommendation on these securities, to which it gives a target price of 220 euros. They are less optimistic in Banco Sabadell, since the Spanish entity reaffirms its 'sell' advice on shares that it values ​​at 180 euros. For the bank's experts based in Alicante, although the evolution shown is better than one would expect, «to a certain extent it is due, and above all in operation, to the sale of part of the Yeezy inventories.» «This would also partly explain the improvement in the objectives for 2024, which, in any case, would already be included in estimates», they conclude. Prior to publication, Morgan Stanley had raised its rating on Adidas from 'underweight' to 'overweight'. Among the arguments for this improvement, the New York bank's experts cited the «appetite» for urban footwear and the association with the star of the NBA's Minnesota Timberwolves, Anthony Edwards.