Shares in Adidas took a steep dive after the company provided a lackluster outlook for 2024 that fell below market expectations. As of 0906 GMT on Thursday, shares were trading 8.1% lower at EUR161.86.
The German sporting-goods giant expects sales to begin on a flattish note in 2024, but anticipates improvement with each passing quarter. However, the company’s target of currency-neutral sales growth at a mid-single-digit rate is below the market consensus of 9% growth.
Adidas is also aiming for an operating profit of approximately EUR500 million in 2024, which is significantly lower than the consensus estimate of EUR1.29 billion.
Baader Helvea analyst Volker Bosse expressed disappointment in Adidas’s 2024 outlook and believed that all sales and earnings projections faced downside risks.
Deutsche Bank analyst Adam Cochrane noted that following Puma’s recent guidance cut, some foreign exchange pressure on gross margin was expected. However, Cochrane highlighted Adidas’s cautious stance throughout the year as a cause for concern.
Cochrane mentioned that the company has set a low bar for the year, potentially leading to scope for upgrades. He also suggested that the market might start questioning whether Adidas is heading into another year of transition.
In addition to the disappointing outlook, Adidas released preliminary figures for 2023, which came in better than expected. Sales on a currency-neutral basis remained flat compared to the previous year, surpassing expectations of a low-single-digit rate contraction. However, in reported terms, sales saw a 5% decline to EUR21.43 billion.
Operating profit for 2023 was EUR268 million, down from EUR669 million in 2022 but still ahead of the company’s target of a EUR100 million operating loss. The underlying operating profit for 2023 was around EUR200 million, surpassing the target of approximately EUR100 million.
Overall, Adidas’s outlook for 2024 has sparked concerns among analysts and investors, leading to a significant drop in share prices. While the company’s performance in 2023 was better than anticipated, the upcoming year presents uncertainties and challenges that may impact its growth and profitability.