adidas (ADS) Q2 2024 earnings summary

Executive summary

• Q2 2024 currency-neutral sales rose 11% year-over-year, with underlying business up 16% and strong improvement in gross margin and EBIT, surpassing expectations.

• Gross margin improved by 150 basis points to 50.8%, driven by lower sourcing costs, reduced discounting, and a favorable product mix, despite a lower Yeezy contribution.

• EBIT nearly doubled to EUR 346 million in Q2, and net income more than doubled to EUR 211 million year-over-year.

• Management raised full-year 2024 guidance to high single-digit sales growth and EBIT of around EUR 1 billion, reflecting strong demand and robust performance.

• Cash and cash equivalents increased 67% year-over-year to EUR 1.7 billion, reflecting strong operating cash flow and effective working capital management.

Financial highlights

• Q2 2024 net sales reached €5,822 million (+9% reported, +11% currency-neutral), with gross profit of €2,959 million and gross margin at 50.8%.

• Operating profit for Q2 was €346 million (5.9% of net sales), up 97% year-over-year.

• Inventories reduced by 18% to €4,544 million compared to June 2023, with healthy aging and EUR 150 million Yeezy inventory remaining.

• Operating working capital as a percentage of net sales improved to 21.7%, better than initial guidance.

• Marketing expenses increased by EUR 90 million, reflecting brand campaigns and product launches.

Outlook and guidance

• Full-year 2024 guidance upgraded to high single-digit currency-neutral sales growth and EBIT of around EUR 1 billion.

• Remaining Yeezy inventory (EUR 150 million) expected to be sold at cost, with no further profit contribution in H2.

• Continued FX headwinds anticipated, but less impact in H2; ongoing investment in marketing and sales.

• Double-digit growth expected in the second half, with supply constraints limiting upside.

• Average operating working capital as a percentage of sales now targeted at 21–22% for 2024.