S&P Global Ratings raised its debt ratings on Adidas due to the brand’s stronger-than-expected deleveraging trend, primarily driven by the group’s sustained momentum in its underlying operating performance and improvements in cash flow generation compared to previous forecasts.

“Adidas AG continues to report solid revenue growth, profitability, cash flows, and credit metrics above our expectations, thanks to broad-based positive business momentum across all regions, channels, and product categories,” said S&P. “After a strong 2024, during which revenue in constant currency grew by 13 percent and reported gross margin reached 50.8 percent (versus 47.5 percent in 2023), the group’s performance remained sound in the first quarter of 2025 with constant currency net sales growing at 17 percent year on year and improving gross margin at about 52.1 percent.”

S&P said it now expects Adidas to report revenue growth of about 8 percent to 9 percent in 2025 and 2026, up from the previously expected low single digits, to account for the stronger-than-anticipated brand momentum, supportive underlying trends within the sportswear category, and potential modest price increases for 2025. S&P noted that Adidas has reaffirmed its guidance of reported operating profit of €1.7 billion to €1.8 billion while confirming a net leverage target of below 2x, according to its calculations.

As a result, S&P now expects S&P Global Ratings-adjusted EBITDA to reach €2.9 billion to €3.0 billion in 2025 and to approach €3.2 billion the following year; this, coupled with a good cash flow conversion with expected annual free operating cash flow (FOCF) before leases of €1.3 billion and €1.5 billion over the same period, should lead to an S&P Global Ratings-adjusted debt-to-EBITDA ratio approaching 1.0x during 2025 and 2026, down from 1.4x posted in 2024.

As a result, S&P raised its long-term issuer credit rating on Adidas to ‘A’ from ‘A-‘ and its short-term issuer credit rating to ‘A-1’ from ‘A-2’. It raised its rating on the unsecured debt in line with the issuer credit rating to ‘A’ from ‘A-‘.

The stable outlook reflects S&P’s view that Adidas’ credit metrics will “remain solid, despite an uncertain macroeconomic environment with adjusted debt to EBITDA remaining comfortably below 1.5x due to good business momentum, continuing healthy and sustainable inventory levels, and a disciplined financial policy.”

Image courtesy Adidas