Adidas AG said that despite reporting better-than-expected first-quarter results, it opted not to raise its financial targets for 2025 due to rising concerns over President Donald Trump-imposed trade tariffs, including the threat that prices will have to rise for U.S. products.

The company said it did not know how much it would boost prices.

Adidas said that despite efforts to reduce exports of its China-made products to the U.S., it remained “somewhat exposed” to the much higher U.S. tariffs on Chinese goods. The bigger impact on U.S. prices comes from the general increase in U.S. tariffs on all other countries, which are primarily held at 10 percent while trade negotiations occur.

While sticking to its full-year guidance, Adidas said the range of possible outcomes was wider today, and uncertainty could put negative pressure on its results later in the year.

First-quarter results were in line with a preliminary forecast given by the company on April 23 that showed currency-neutral sales increased 13 percent year-over-year (y/y). Excluding Yeezy sales in the prior year, currency-neutral revenues for the Adidas brand increased 17 percent, driven by double-digit y/y growth across all markets and channels. Excluding Yeezy, sales in North America rose 13 percent.

Net income from continuing operations increased 155 percent in the first quarter to €436 million ($496.5 million), above the €383 million consensus forecast by analysts.

Adidas CEO Bjørn Gulden Commentary
“I am very proud of what our team achieved in Q1. Double-digit growth across all markets and channels in today’s volatile environment shows the strength of our brand and underlines the great job our people are doing. The operating profit of €610 million and the 9.9 percent operating margin prove the great potential of our company. A great quarter!

“In a ‘normal world’ with this strong quarter, the strong order book, and, in general, a very positive attitude towards Adidas, we would have increased our outlook for the full year both for revenues and operating profit. The uncertainty regarding the U.S. tariffs has currently put a stop to this.

“Although we had already reduced the China exports to the U.S. to a minimum, we are somewhat exposed to those currently very high tariffs. What is even worse for us is the general increase in U.S. tariffs from all other countries of origin. Since we currently cannot produce almost any of our products in the U.S., these higher tariffs will eventually cause higher costs for all our products for the U.S. market. Given the uncertainty around the negotiations between the U.S. and the different exporting countries, we do not know what the final tariffs will be. Therefore, we cannot make any ‘final’ decisions on what to do. Cost increases due to higher tariffs will eventually cause price increases, not only in our sector, but it is currently impossible to quantify these or to conclude what impact this could have on the consumer demand for our products.

“As always, we will try to maneuver through this uncertainty in the most pragmatic, agile and flexible way. We have all parts of the organization involved and will do everything we can to ensure that our U.S. retail partners and our U.S. consumers will get the Adidas product they want and at the best possible price.

“We currently see a positive development in all other markets and will, of course, try to compensate for the uncertainty in the U.S. by delivering even better results in the rest of the world. We therefore stick to our original outlook but admit that there are uncertainties that could put negative pressure on this later in the year.

“The Adidas brand is strong; we have great people and enough resources to get even stronger through this uncertain and difficult period.”

First-Quarter Results
(double-digit revenue growth driven by strong brand momentum)

In the first quarter of 2025, currency-neutral revenues increased 13 percent versus the prior year. The double-digit growth reflects the strong momentum of the Adidas brand, which increased 17 percent. In euro terms, revenues grew 13 percent, or nearly €700 million, to €6,153 million (2024: €5,458 million). Having completed the sale of the remaining Yeezy inventory at the end of last year, the company’s results for the first quarter of 2025 do not include any Yeezy revenues (2024: around €150 million).

Footwear-led growth across product categories
Footwear continued to lead the company’s growth with a currency-neutral increase of 17 percent during the quarter, driven by double-digit growth in Originals, Sportswear, Running, Training, Specialist Sports, and Performance Basketball. Apparel revenues were up 8 percent, mainly driven by double-digit growth in Originals, Sportswear, and Outdoor. Accessories continued to grow and increased by 10 percent.

Double-digit increases across major categories in Lifestyle and Performance
Lifestyle revenues increased double-digits during the quarter, driven by Originals and Sportswear. New iterations around colorways and materials continued to drive healthy demand for the company’s popular Terrace, Skate and Retro Running franchises. These included animal and floral print versions of the Samba, Campus and SL72.

In the low-profile category, Adidas launched additional styles in response to strong sell-out trends for its Taekwondo, Japan, and Tokyo models for the spring season, including Adiracer, Rasant, and the Bad Bunny Ballerina. In addition, Adidas began to re-introduce the Superstar, one of its most iconic sneakers, with a community-focused approach.

To round out its modern footwear silhouette offering, the brand continued to incubate Megaride and Aruku and further broadened its franchise portfolio with the introduction of the Goukana. The Three Stripes’ popularity and fresh products such as Adicolor and Firebird drove strong double-digit growth in Originals apparel.

In Sportswear, growth accelerated as Adidas introduced new franchises tailored to commercial price points. Relevant collaborations with partners included Tate McRae, Edison Chen, Pharrell Williams, Bad Bunny, Bape, and Sporty & Rich, with a strong presence at events, including Paris Fashion Week, provided visibility of the brand’s lifestyle offering.

On the Performance side, several categories contributed to high-single-digit growth in the first quarter, led by Running, where growth accelerated by double digits. With continued strong visibility for its record-breaking Adizero footwear family and matching performance apparel, Adidas further scaled its presence in the running market.

The commercial launch of the Adios Pro 4, the shoe for marathoners, and the Evo SL, offering performance and style at a compelling price point, expanded the brand’s offering at the core of performance running. In addition, everyday running shoes such as Supernova continued to grow.

Training also accelerated growth, driven by double-digit increases in footwear, led by the Dropset franchise. In Football, new color packs and performance upgrades for the brand’s iconic footwear franchises Predator and F50 drove increases in footwear, while growth in the company’s jersey business was impacted by the successful kit sales ahead of major tournaments in the prior-year period. At the same time, Adidas continued to benefit from the popularity of its retro-inspired Football apparel range.

The newly launched Motorsport collection and technical product innovation in Outdoor and Specialist Sports also drove growth across these categories, adding to the brand’s broad-based improvement.

Adidas brand with double-digit increases in all channels and markets
Continued double-digit growth for the Adidas brand in wholesale and direct-to-consumer (DTC) channels underlined the demand for its products during the quarter. Strong sell-through rates and increased shelf space allocations led to wholesale revenues rising 18 percent on a currency-neutral basis. Own retail recorded growth of 13 percent, driven by double-digit comp growth across the company’s fleet of own stores. E-commerce revenues declined 3 percent, which is solely related to the phase-out of the Yeezy business. Excluding Yeezy in the prior year quarter, revenues in e-commerce were up 18 percent and contributed to 15 percent growth in DTC.

From a regional perspective, currency-neutral net sales grew at double-digit rates in Latin America (+26 percent) and Emerging Markets (+23 percent) during the first quarter. In addition, Europe (+14 percent), Greater China (+13 percent) and Japan/South Korea (+13 percent) sustained double-digit increases. In all these markets, growth was broad-based, including substantial improvements in wholesale and its DTC business. Revenues in North America increased 3 percent, impacted by the phase-out of the Yeezy business. Excluding Yeezy sales in the prior year quarter, revenues in North America also increased at a double-digit rate (+13 percent), driven by growth in both wholesale and DTC.

Gross margin improves 0.9 percentage points to 52.1 percent
The company’s gross margin increased 0.9 percentage points to 52.1 percent during Q1 (2024: 51.2 percent). The year-over-year increase of the Adidas brand gross margin was even stronger at 1.6 percentage points. Lower product and freight costs and reduced discounting mainly drove the positive development.

Continued brand investments coupled with strong leverage on overheads
Other operating expenses increased 6 percent to €2,615 million in the first quarter (2024: €2,478 million). As a percentage of sales, other operating expenses decreased 2.9 percentage points to 42.5 percent (2024: 45.4 percent). Marketing and point-of-sale expenses were up 14 percent to €746 million (2024: €657 million). The increase reflects investments in ‘You Got This,’ Adidas’ multi-year brand campaign featuring a series of global and local chapters, and ‘The Original,’ connecting young generations with Originals’ iconic silhouettes.

In addition, marketing investments comprised the launch of the partnership with the Mercedes-AMG Petronas Formula 1 team, activations around major events, including Super Bowl and NBA All-Star Weekend, as well as support for new product launches, including Adios Pro 4 in Running, the Predator ‘Teamgeist’ pack in Football and Lightblaze in Sportswear.

As a percentage of sales, marketing and point-of-sale expenses were up 0.1 percentage points to 12.1 percent (2024: 12.0 percent). Operating overhead expenses grew 3 percent to €1,870 million (2024: €1,822 million) as the company continued to invest in strengthening its sales activities while managing its overall cost base. As a percentage of sales, operating overhead expenses decreased 3.0 percentage points to 30.4 percent (2024: 33.4 percent), reflecting leverage as overhead grew significantly slower than revenues.

Operating profit increases significantly to €610 million
The company’s operating profit increased by 82 percent to €610 million in the first quarter (2024: €336 million), reflecting an operating margin increase of 3.8 percentage points to a level of 9.9 percent (2024: 6.2 percent). Having completed the sale of the remaining Yeezy inventory at the end of last year, there was no Yeezy contribution to the company’s operating profit in the quarter (2024: around €50 million). Net financial expenses decreased to €25 million (2024: €91 million), reflecting a normalization as negative effects related to hyperinflation and cash repatriation lessened compared to the prior-year quarter. Against an income before taxes of €585 million (2024: €245 million), the company recorded income taxes of €149 million (2024: €74 million), reflecting a tax rate of 25.4 percent (2024: 30.1 percent). As a result, net income from continuing operations more than doubled to €436 million (2024: €171 million) and led to basic and diluted EPS from continuing operations of €2.44 (2024: €0.96).

Healthy inventories to support continued double-digit growth for the Adidas brand
Inventories increased 15 percent to €5,072 million (2024: €4,427 million), reflecting a healthy position to support continued double-digit topline growth for the Adidas brand. On a currency-neutral basis, inventories also increased 15 percent compared to the prior year. Operating working capital was up 15 percent to €5,461 million (2024: €4,745 million). On a currency-neutral basis, operating working capital increased 16 percent. Average operating working capital as a percentage of sales decreased 3.6 percentage points to 19.9 percent (2024: 23.5 percent). This development reflects efficient operating working capital management and strong topline growth over the past year.

Net leverage ratio improving to 1.6x despite operating working capital investments
Cash and cash equivalents increased 32 percent, or nearly €350 million, to €1,432 million at March 31, 2025 (March 31, 2024: €1,086 million), mainly driven by net cash generated from operating activities. The decrease in cash and cash equivalents compared to December 31, 2024, mainly reflects seasonality and operating working capital investments to support continued double-digit top-line growth for the Adidas brand. Adjusted net borrowings at March 31, 2025 amounted to €4,586 million (March 31, 2024: €4,958 million), representing a year-over-year decrease of almost €400 million. This development was mainly driven by a decline in long-term borrowings, lease liabilities and an increase in cash and cash equivalents. The company’s ratio of adjusted net borrowings over EBITDA improved strongly to 1.6x (March 31, 2024: 3.2x).

Full-Year Outlook
(outlook confirmed with increased uncertainty due to U.S. tariffs and higher macroeconomic risks)

.External volatility and macroeconomic risks have increased significantly since Adidas first issued its full-year outlook at the beginning of March. While the company confirms its outlook, the range of possible outcomes has increased. It now includes both upside potential reflecting the stronger-than-expected first quarter results on the one hand and downside risk due to the increased uncertainty around the possible direct and indirect impacts from higher U.S. tariffs on the other hand.

Currency-neutral sales to increase at a high-single-digit rate in 2025
Adidas expects to continue to gain market share and grow its currency-neutral sales at a high-single-digit rate in 2025; this reflects continued double-digit growth for the Adidas brand. A significantly better, broader and deeper product range combined with an increased focus on local consumer preferences and much-improved retailer relationships will be the main drivers of the projected top-line increase. In addition, impactful marketing initiatives will further increase the company’s brand momentum and fuel the expected top-line growth.

Operating profit to increase further to between €1.7 billion and €1.8 billion
While Adidas will continue to increase marketing and sales investments, operating overhead efficiencies will allow the company to leverage its strong top-line growth. Combined with continued gross margin expansion, the company expects this to lead to further bottom-line improvements in 2025. As a result, the company projects operating profit to increase to between €1.7 billion and €1.8 billion in 2025. Having completed the sale of the remaining Yeezy inventory in 2024, the company’s outlook does not include any Yeezy revenues (2024: around €650 million) or profits (2024: around €200 million) in 2025.

Image courtesy Adidas