By Linda Pasquini
July 30 (Reuters) - Adidas investors punished the German sportswear maker's profit miss on Thursday, dragging its shares down a record 19% despite the company lifting its annual sales outlook on demand for its retro apparel and a soccer World Cup boost.
Adidas' operating profit in the quarter undershot analyst estimates as a marketing blitz related to the FIFA tournament dented margins. Some analysts said they had hoped the post-World Cup revenue outlook would have been even stronger.
Adidas is in a race to roll out new styles as the popularity of its Samba and Gazelle sneakers gradually fades. It had hoped to build from a strong World Cup showing as it seeks to stay ahead of rivals such as Nike.
CEO Bjorn Gulden said he was surprised by the share price fall, adding the company kept its guidance conservative and was not trying to optimise profit short-term "just to impress certain people" by sacrificing on marketing spend.
"We're investing in innovation... in partnerships, and we are investing in visibility. And that's why I think we have taken as much market share as we have," he said. "I see the share price and I don't know what the misunderstanding is."
WORLD CUP PUMPED UP INVESTOR EXPECTATIONS
Deutsche Bank wrote in a note to investors that it was a "good quarter", but that against sky-high World Cup-linked expectations the numbers had disappointed the market, with implied sales growth in the second half lower than hoped for.
"You spend more money and you're now implying second half sales guidance is not really that impressive compared to what you just delivered," Deutsche Bank analyst Adam Cochrane said, referring to the 30% jump in marketing spend in the quarter.
"The share price reaction is a bit steeper maybe than I would have initially expected," he added.
Citi analysts said that the sales upgrade had still been "well below" sell-side hopes for faster growth. "This is likely to reignite the debate around growth sustainability post-World Cup," they said in a note.
Adidas shares were last down 18.7%, on track for a record one-day drop since the company's listing in 1995. They had been on a strong run since April but are now down nearly 12% this year.
Cochrane pointed out that there had been some sharp share price swings in recent days, including in the European luxury sector.
"We've seen over the last couple of days, Kering up 15% yesterday, Hermes down 10-12%. It does feel like we're in a moment of time where sometimes the share price reaction on the day can be quite extreme," he said.
"So let's put that into some context."
ADIDAS RAISES 2026 REVENUE OUTLOOK
Adidas nudged up its full-year currency-adjusted revenue growth forecast to 9% to 10%, compared with previous guidance for high-single-digit growth. It held its operating profit forecast at a rise to €2.3 billion.
Operating profit in the April to June period rose by 5% to €574 million but came in below an analyst consensus of €623 million, weighed down by marketing spend.
Quarterly revenue grew by a currency-adjusted 14% to €6.74 billion ($7.7 billion), above the €6.63 billion projected by analysts in a company-compiled poll.
The rise was driven by double-digit growth in all regions except Europe, where heavy discounting at many retailers was putting lifestyle footwear under pressure, the company said.
In a separate statement, Adidas said it appointed Birgit Kretschmer to succeed Harm Ohlmeyer as chief financial officer at the end of the year, following Ohlmeyer's decision not to extend his current term.
(Reporting by Linda Pasquini;Editing by Ludwig Burger and Emelia Sithole-Matarise)
