By Kim Richters 
 

Shares in Adidas AG traded lower on Thursday after the German sporting-goods company raised its targets for sales and profitability for the year, an upgrade that had been expected according to analysts.

At 0832 GMT, Adidas traded 4.2% lower at EUR322.05.

On the back of second-quarter results that beat expectations, Adidas said Thursday that it now expects currency-neutral sales to grow up to 20% on-year in 2021, which compares with previous company guidance of a high-teens growth rate. It targets an operating margin of 9.5%-10%, slightly up from 9%-10% prior, and guided for net income from continuing operations of EUR1.4 billion-EUR1.5 billion for the year, versus a target of EUR1.25 billion to EUR1.45 billion previously.

"FY21E guidance raise is modest (perhaps conservative) with sell-side consensus expectations largely there already," said Piral Dadhania, analyst at RBC Capital Markets.

Analysts at Citi said the modest guidance upgrade could reflect continuing uncertainty related to the coronavirus pandemic and pressures in China. While they see revenue guidance in line with consensus expectations, Adidas's profitability outlook could lead to estimates being upgraded by a low-single digit percentage, they said.

As for Adidas's second quarter, sales of EUR5.08 billion beat estimates of EUR4.97 billion and operating profit of EUR543 million was ahead of expectations of EUR480 million, according to consensus forecasts provided by FactSet. The company said Thursday that group sales grew 52% compared with the same period a year earlier and increased strongly in all regions except greater China, where they fell 16%. Adidas was one of several fashion companies that faced backlash in China earlier this year over their stance on cotton produced in the Xinjiang region.

"From a channel perspective, the company's top-line increase was characterized by a strong recovery from the material revenue decline in its physical distribution channels during the second quarter of 2020, when the global coronavirus pandemic had caused a very large number of temporary store closures," said Adidas.

Wholesale revenue and sales in the company's own-retail stores grew at a high-double-digit rate, while e-commerce revenues fell 14% in the three-month period.

 

Write to Kim Richters at kim.richters@wsj.com

 

(END) Dow Jones Newswires

August 05, 2021 04:47 ET (08:47 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.
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