Update 2 - Adidas stock rises due to unexpected upward revision of earnings guidance

Report rewritten, fifth paragraph now includes share price movement and CEO quote, ninth paragraph adds analyst comments, and a chart has been included

Tristan Veyet/Alessandro Parodi

Reuters, October 21 - In early trading on Wednesday, Adidas (ADSGn.DE) shares rose 2.4% after the German sportswear group raised its full-year guidance based on preliminary, unscheduled results that exceeded market expectations (link).

Taking into account a one-off US tariff rebate of 200 million euros in the third quarter, and planned reinvestment of 100 million euros in the fourth quarter, Adidas now expects full-year operating profit to reach 2.5 billion euros, up from the previous target of 2.3 billion euros.

As the popularity of "Samba" and "Gazelle" sneakers gradually wanes, the company has been investing in launching new styles, including the debut of its lightest ever racing shoe, the Adizero Adios Pro Evo 3, which helped Kenyan runner Sabastian Sawe break the two-hour marathon barrier in April (link).

Adidas had hoped to maintain its lead over Nike and other rivals through strong performance during the World Cup, but its post-World Cup revenue outlook released in July disappointed the market.

“At present, the footwear lifestyle business faces challenges mainly due to excess inventories and too many market discounts, but we know this situation will normalize soon,” Adidas CEO Bjørn Gulden said in a statement on Tuesday.

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JPMorgan analysts pointed out that excluding the tariff rebate, third-quarter operating profit was 9% above expectations. Including the rebate, profit rose 37% to 1.01 billion euros ($1.13 billion), surpassing the company-provided analyst consensus of 742 million euros.

In a note to investors, Metzler analysts said this surprising update “once again provides powerful evidence that in a challenging environment, Adidas is not only continuously gaining market share, but also achieving profitable growth.”

However, Metzler analyst Felix Denl noted that the upward revision mainly reflects the one-off impact of the US tariff rebate, rather than stronger underlying business performance, so the impact on market expectations may be limited.

(1 USD = 0.8912 euros)

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