By Andrea Figueras

Shares in Adidas climbed after the company beat its own profit expectations amid fierce competition in the sector and as its biggest rival, Nike, continues to pursue a brand revamp strategy.

The German sporting-goods company reported on Tuesday an operating profit of 1.34 billion euros ($1.40 billion) for 2024, up from 268 million euros in 2023 and surpassing the company's own guidance of around 1.2 billion euros.

For the fourth quarter alone, the group swung to an operating profit of 57 million euros compared with an operating loss of 377 million euros in the year-earlier period. The result exceeded consensus estimates of an operating loss of 63 million euros, according to RBC Capital Markets.

Quarterly sales grew 19% on a currency-neutral basis to around 5.97 billion euros, while the gross margin jumped 5.2 percentage points to 49.8%.

"Although we are not yet where we want to be long term, I am very happy with this development which was much better than we had expected," Chief Executive Bjorn Gulden said.

Adidas is undergoing significant changes behind the scenes, with Gulden reviewing almost all aspects of the business, RBC Capital Markets analysts Piral Dadhania and Nikolaos Lafioniatis said in a note.

The update sent the stock up 6.5% to 259.00 euros in European morning trading. Shares in German rival Puma also rose 2.2% to 41.52 euros.

The company's preliminary results reflect the combination of impressive brand heat and gross margin rebuild at a challenging time for some of its peers, analysts at Jefferies said in a research note.

The news come as its U.S. rival Nike continues with its turnaround plan under new Chief Executive Officer Elliott Hill, who took the reins of the company in September to lead a comeback. In addition, the industry has become more competitive, with newcomers such as On Holding and Hoka gaining popularity.

The question now is how much greater the longer-term potential of Adidas might be, Jefferies analysts said, adding that the ability of the German company to trade at full price when mark-downs abound is a sign of strength.

While the group is scheduled to release its final results and guidance for this year on March 5, the CEO anticipated double-digit growth with the Adidas brand, improved operating profit, and further progress toward its 10% margin ambition.

"We see potential to increase our market share in all markets," Gulden said, though he added that the current environment is marked by macroeconomic uncertainty.

Write to Andrea Figueras at andrea.figueras@wsj.com

(END) Dow Jones Newswires

January 22, 2025 03:55 ET (08:55 GMT)

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