(Bloomberg) -- Adidas AG reported strong third-quarter growth across most regions in a sign a revival plan led by Chief Executive Officer Bjorn Gulden is starting to work.
The German sportswear group said Tuesday that currency-neutral revenue grew by double digits in most places, except North America, where dwindling sales of Yeezy sneakers are still weighing on the region. Group operating profit also jumped to €598 million ($646 million), from €409 million in the same period last year.
Earlier this month, Adidas raised its annual profit target for the third time, amid surging demand for its retro kicks. The company said it now expects to generate operating profit of around €1.2 billion, up from the previous forecast of around €1 billion.
Shares of Adidas rose as much as 3% in early trading. The stock had risen 16% so far this year through Monday’s close. Rivals Nike and Puma have both posted losses in contrast.
Gulden took over Adidas in January 2023, shortly after the company canceled its Yeezy partnership with Ye, following a string of anti-semitic comments by the rapper and designer. Gulden’s plan for Adidas is to reduce the company’s previous reliance on the Yeezy brand, while refocusing the design of new footwear and apparel and streamlining its operations and costs.
His early bet on boosting popular retro products like Samba and Gazelle shoes is paying off and Adidas is now scaling up volumes for its 70s-era running shoes SL72. Adidas is outperforming cross-town rival Puma and the goal is to close the gap to Nike, which remains the industry leader despite its struggles.
Post-Yeezy Era
All regions, sales channels and product divisions are now growing, Gulden said in a statement. Even in North America, where sales fell 7%, the region returned to positive growth when the Yeezy brand is excluded, he said.
The US is without doubt the “most challenging market,” Gulden said on a call with journalists, but he expects sales growth to return in the final quarter. Strong order books signal that retailers are increasing appetite for Adidas in a post-Yeezy era, according to Gulden.
“Does that mean that we are beating Nike in basketball? Of course not,” Gulden said. “There’s a long, long way for us in the US but we feel we have turned from negative to positive, and basketball being part of it, and we are pretty optimistic about the midterm future in the US.”
Adidas is currently trying to get rid of the remaining Yeezy inventory, which contributed around €50 million in operating profit during the third quarter. It aims to be “clean” of the footwear in the final quarter and expects no further profit contribution.
Ye and Adidas agreed to reach a settlement during the quarter that concludes all claims and included no payments, said Gulden.
“No one owes anybody anything anymore. So whatever was is history,” he said.
Eyeing its next big seller, Adidas has said previously it’s preparing more launches in its lifestyle running shoes and its superstar brand.
The company’s current momentum is a sign that Adidas has more to offer than just its classic sneakers, according to analysts at Morgan Stanley led by Edouard Aubin. These strong top-line trends are likely to continue in the final quarter and next year, said RBC analysts led by Piral Dadhania.
--With assistance from Joel Leon.
(Updates with Ye settlement and CEO comment on US outlook from eighth paragraph.)
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