Adidas management’s view on trajectory of its recovery unchanged. Still much to do in FY24 While Adidas’ FY23 operating profit came in better than guided, this was mainly due to less write down of Yeezy inventory as Adidas decided to sell it through. Excluding the Yeezy revenues in both years, currency-neutral revenues were up 2% yoy in 2023. Adidas’ recovery plan set out in FY23 is unchanged. Then, management thought FY23 would be a breakeven year (FY23 operating profit was €268m), with things starting to improve in 2024, that 2025 would be far more profitable, and that in FY26 Adidas should be back to being a double-digit growth company with a double-digit EBIT. Adidas’ FY24 guidance is for mid-single-digit currency-neutral revenues growth, which assumes the rest of Yeezy inventory (c.€250m) is sold at cost. Excluding the Yeezy revenues in both years, the top-line guidance reflects currency-neutral growth at a high-single-digit rate in the underlying Adidas business. By quarter, sales growth is expected to improve from quarter-on-quarter with some growth in Q1 improving to double-digit in 2H. FY24 operating profit guidance is €500m. Management believes its new product pipeline is good and ready for the year of sport in 2024 - Olympics (not a commercial event), the Euro and COPA. US has too much inventory and likely to be FY25 before sorted. Europe in a good position and selling at full price From a JD Sports perspective, the most interesting comments were on inventory. Adidas ended the year with a ‘healthy‘ €4.5bn of inventory, including €250m of Yeezy. All regions are in good shape except for the US. Adidas management thinks the US is unlikely to be sorted until FY25 as it is 6-9 month behind the rest of the company in getting back to a healthy inventory position. New stock is selling-through fine and Adidas’ order book is starting to move from being down to being up. However, according to Adidas management, there is still excess inventory in the US industry generally. News on Europe is more positive. Adidas’ inventory is clean, and it isn’t discounting in its DTC business (discount rate single digit for the first two months of the year). While more positive noises are coming from Adidas, what NIKE will say on 21st March (Q3) is more important for improving sentiment towards JD Sports. NIKE’s weak performance/high discounting at the end of 2023 contributed to JD’s January profit warning. JD is belatedly giving FY25 guidance on March 28th. Given challenging 1H comps, we do not see March’s update as a trigger for a share price re-rating as short term demand concerns over the US and UK consumer are likely to persist. Heading2 Video provides a powerful way to help you prove your point. When you click Online Video, you can paste in the embed code for the video you want to add. You can also type a keyword to search online for the video that best fits your document. To make your document look professionally produced, Word provides header, footer, cover page, and text box designs that complement each other.