EXEC: Adidas Shares Sink After Strong 2025, Hurt by Weakness in 2026 Op Profit Guidance

Looking ahead, Adidas expects high-single-digit growth in currency-neutral (cn) terms for full-year 2026, which he said will add another €2 billion in revenue.

“We expect operating profit, despite the headwind from tariffs and negative FX of around €400 million, to grow faster than revenue and to increase to around €2.3 billion ($2.67 billion). That will in my opinion define Adidas again to be a healthy and successful company.”

ADI shares were down more than 8 percent in European mid-afternoon trading on Wednesday, culminating in a 19 percent decline since the start of the year. Operating profit guidance for 2026 apparently fell short of analysts’ views, with U.S. tariffs and currency headwinds expected to hold back profit growth.

The company’s €2.3 billion operating profit forecast for 2026 compares with an analysts’ consensus estimate of €2.72 billion for the year ahead. There are also concerns that the U.S. tariff issue is not settled math at this point. Gulden said that the guidance did not take the newest tariff rate (after the U.S. Supreme Court ruling) into account.

For 2027 and 2028, Gulden said Adidas expects to continue to take market share, grow sales at a high-single-digit rate and deliver an operating margin of more than 10 percent in 2028.

“To achieve this, our focus will continue to be consumer-oriented and to be the global sports brand with a local mindset,” he envisioned. “We have the scale, the innovation, the product pipeline, the marketing concepts, and the talented people to achieve this. We now have to further reduce complexity, put decision-making closer to the consumer and where the knowledge sits and make sure we optimize our systems, processes, and organization to the new reality in the global marketplace.”

Fourth Quarter Summary
In the fourth quarter of 2025, currency-neutral revenues for the Adidas brand increased 11 percent versus the prior year. Having completed the sale of the remaining Yeezy inventory at the end of last year, the company’s results for the fourth quarter of 2025 do not include any Yeezy revenues versus ~€50 million in 2024.

Including Yeezy sales in the prior year, currency-neutral revenues increased 10 percent year-over-year (y/y). In reported euro terms, revenues amounted to €6.08 billion (~$7.07 bn) in the quarter (compared to €5.97 billion in Q4 2024), despite the strengthening of the euro against several currencies. The company said this led to an unfavorable translation impact of 8 percentage points or more than €400 million in absolute terms.

Adidas AG reports in the European Commission euro (€) currency. Fourth quarter conversions from euros to U..S. dollars were calculated at a rate of 1 euro = 1.164 U.S. dollars. JP Morgan suggests alternative forecasts and data sources indicate a potential range of 1.15 to 1.20 for the period, supported by expectations of euro strength and U.S. dollar moderation.

Fourth Quarter Category Summary

Footwear revenues for the Adidas brand increased 5 percent y/y to €3.25 billion (~$3.78 bn) on a currency-neutral basis in Q4, on top of 25 percent growth in the prior-year fourth quarter. The company said this comes despite a strong focus on full-price business within a promotional marketplace.

“The broader and deeper product offering drove double-digit footwear increases in several sports categories, including more than 35 percent growth in Running,” the company said in its earnings report.

Apparel revenues increased 20 percent y/y to $2.38 billion (~$2.78 bn), as Adidas said to continued to expand its brand momentum and market share gains across product divisions. The first jersey launches for the FIFA World Cup 2026 supported growth in Apparel, in addition to double-digit Apparel growth in Running, Training, Outdoor, and Originals.

Accessories grew 7 percent y/y to €447 million (~$520 mm) in the fourth quarter.

Fourth Quarter Segment Summary

Performance revenues increased 27 percent y/y on a currency-neutral basis in the fourth quarter, led by double-digit growth in Football, Running, Training, and Specialist Sports.

“Product highlights included successful launches of the FIFA World Cup 2026 home kits and the official match ball Trionda, the continued expansion of the brand’s Running footwear offering with introductions of the Adizero Evo SL ATR and the Supernova Rise 3, as well as the commercial launch of Anthony Edwards’ latest signature model AE2,” Adidas detailed.

Lifestyle revenues for the Adidas brand rose 3 percent. The brand said it marketed halo products, such as the award-winning Adistar Jellyfish by Pharrell Williams, and collaborations with partners such as Bad Bunny, Arte Antwerp, Willy Chavarria, and Edison Chen, while focusing on full-price sales and limiting participation in promotional sales events. In addition to protecting the brand and its key Lifestyle franchises, Adidas said it seeded successful local creations, such as the popular Chinese Track Top out of the brand’s Shanghai creation center, in other regions with significant scope for commercial volumes in the future.

Fourth Quarter Channel Summary

DTC (direct-to-consumer) channel net sales grew 19 percent y/y in currency-neutral terms to €3.01 billion (~$3.51 bn) in the fourth quarter, reportedly reflecting “continued strong consumer demand and sell-through rates” for the brand’s products.

E-commerce revenues increased 21 percent y/y, while owned-retail (brick & mortar) revenues were said to be up 17 percent, driven by double-digit like-for-like (comp-store) growth in all store formats.

“Across DTC, Adidas maintained a focus on full-price sales as reflected by limited discounts and corresponding gross margin improvements in both e-commerce and own[ed] retail, the company noted.

Wholesale revenues increased 2 percent y/y to €3.04 million (~$3.54 bn) in Q4, stacked on top of more than 20 percent growth in the prior-year fourth quarter. The company said it adopted a conservative Wholesale channel sell-in approach, especially in Europe and North America, given the “uncertain consumer environment and heightened promotional activity.”

Fourth Quarter Regional Summary

Adidas brand net sales grew at double-digit rates y/y in currency-neutral terms in Greater China (+15 percent), Emerging Markets (+15 percent), Latin America (+18 percent), and Japan/South Korea (+13 percent).

Revenues in Europe grew 6 percent y/y and sales in North America increased 5 percent y/y, as the company adopted the aforementioned conservative approach to Wholesale channel sell-in.

“Like all other markets, Europe and North America recorded strong double-digit increases in the brand’s DTC business, driven by both own retail and e-commerce, reflecting the strong sell-through for Adidas products, the company added.

Fourth Quarter Profitability & Expenses

Consolidated Gross Margin increased 1.0 percentage points y/y to 50.8 percent of net sales in the fourth quarter, which was said to reflect “a healthy level of full-price sales, a more favorable business mix, and lower product and freight costs.” These positive drivers reportedly more than offset negative impacts from unfavorable currency effects and higher U.S. tariffs.

Other Operating Expenses decreased 1.0 percent y/y to €2.97 billion from €2.99 billion in Q4 2024. As a percentage of sales, Other Operating Expenses decreased 130 basis points to 48.8 percent of net sales.

Marketing and POS (point-of-sale) Expenses were up 9.0 percent y/y to €823 million in the quarter, compared to €754 million in the prior-year quarter, which was said to reflect “continued brand investments.” Activations reportedly featured the first FIFA World Cup 2026 product launches, kits for the Olympic and Paralympic Winter Games 2026, and locally created collections at events like Shanghai Fashion Week.

As a percentage of sales, Marketing and POS Expenses were up 90 basis points to 13.6 percent of net sales, compared to 12.6 percent in the prior-year Q4 period.

Operating Overhead Expenses decreased 4.0 percent y/y to €2.14 billion from €2.24 billion in Q4 2024. The company said it continued to invest into its sales and distribution capabilities while managing its overall cost base.

As a percentage of sales, Operating Overhead Expenses declined 2.3 percentage points to 35.3 percent of net sales in the quarter.

Operating Profit more than doubled to €164 million (~$191 mm) in the fourth quarter, compared to €57 million in Q4 2024, representing an operating margin of 2.7 percent of net sales, up 170 basis points year-over-year. With the completion the sale of the remaining Yeezy inventory in 2024, there was no Yeezy contribution to the company’s operating profit in the quarter.

Net Financial Expense decreased to €68 million from €86 million in Q4 2024, said to be mainly due to currency developments, and the tax rate was 12.1 percent for the quarter, compared to 6.8 percent in the prior-year quarter.

Net Income from continuing operations rose to €85 million (~$99 mm), or €0.42 per share, in the fourth quarter, compared to a net loss of €27 million, or a loss of €0.26 per share in the 2024 fourth quarter.

Full-Year 2025 Revenue Summary

Balance Sheet and Cash Management Summary

Inventories increased 17 percent y/y to €5.83 billion at the end of December 2025, compared to €4.99 billion at the end of December 2024, which the company said reflected its “planned top-line growth, earlier product purchases related to the FIFA World Cup 2026, and faster inbound deliveries.” On a currency-neutral basis, Inventories increased 23 percent year-over-year.

Accounts Receivable increased 9 percent to €2.63 billion at the end of December 2025, compared to €2.41 billion at the end of December 2024, said to be a result of growth in the company’s Wholesale business and higher marketplace receivables. On a currency-neutral basis, Accounts Receivable were up 18 percent year-over-year.

Accounts Payable decreased 6 percent to €2.91 billion at the end of December 2025, compared to €3.10 billion), said to be mainly due to “a different sourcing pattern compared to the prior year.” On a currency-neutral basis, Accounts Payable were down 4 percent.

Average Operating Working Capital as a percentage of sales increased 3.3 percentage points y/y to 23.0 percent, reportedly a reflection of the company’s Operating Working Capital investments.

Capital Expenditures amounted to €477 million in 2025, compared to €540 million in 2024. Investments in new or remodeled owned-retail or franchise stores, as well as shop-in-shop presentations of Adidas products in customers’ stores, remained a priority, representing around half of the Capital Expenditures. The remainder consisted of investments in IT as well as the company’s administration and logistics infrastructure.

Adjusted Net Borrowings at December 31, 2025 amounted to €4.33 billion, compared to €3.62 million), and the company’s ratio of Adjusted Net Borrowings over EBITDA improved to 1.4x in 2024, compared to 1.5x in 2024.

Proposed Dividend Increase
The company reported that the Adidas AG Executive and Supervisory Boards will recommend paying a dividend of €2.80 per dividend-entitled share to shareholders at the Annual General Meeting (AGM) on May 7, 2026. This represents an increase of 40 percent compared to the prior year (2025: €2.00 per share).

The proposal reportedly reflects “the company’s better-than-expected performance in 2025, its strong financial profile, and management’s confident outlook for the future.”

The dividend payout of around €500 million (2025: €357 million) reflects a payout ratio of 36 percent of Net Income from continuing operations, within the company’s target range.

“Our confidence in Adidas’ future top- and bottom-line growth and cash flow generation is also the reason why we now have decided to launch a share buyback,” Gulden added. “We will buy back shares for up to €1 billion this year.”

Total cash returns to shareholders are expected to amount to up to €1.5 billion in 2026 as the company, in addition to the dividend payout of around €500 million, plans to buy back shares worth up to €1 billion this year. Adidas intends to cancel the repurchased shares.

Full-Year 2026 Outlook
Within an environment that is characterized by macroeconomic challenges and elevated uncertainty, Adidas AG said it expects currency-neutral sales to increase at a high-single-digit rate in 2026, reflecting growth of “around €2.0 billion in absolute terms.”

The company said its above-industry growth is enabled by its “proven operating model, with market empowerment and a clear focus on local consumer preferences at its core.”

“With a strong product pipeline across product divisions and categories, much improved retailer relationships, and large roster of brand partners across sports and culture, Adidas has all the building blocks in place to keep driving strong brand momentum and high-quality growth,” the company added.

Adidas expects to increase its market share in all markets in 2026. The company expects currency-neutral sales to grow at a low-double-digit rate in North America, Greater China, Emerging Markets, Latin America, and Japan/South Korea. Currency-neutral revenues in Europe are projected to increase at a mid-single-digit rate.

Adidas said it will continue to invest into marketing and sales activities to drive brand momentum and high-quality growth beyond this year. This is said to includes partnerships with teams and athletes in big global as well as smaller local sports, activations around sports and cultural events in all markets, support for product launches, and initiatives to further strengthen retailer relationships.

In addition to planned investments, Adidas said it faces temporary headwinds from several external factors in 2026. The full-year impact of higher U.S. tariffs and unfavorable currency developments are expected to weigh on operating profit in an amount of around €400 million. Despite these headwinds, the company said it expects profitability to further improve in 2026 and projects operating profit to increase to a level of around €2.3 billion.

Mid-Term Outlook
The company said strong structural growth of the global sporting goods industry continues to be very supportive for the Adidas brand, pointing out that sports participation rates continue to rise globally, health and fitness awareness play an increasingly important role in people’s lives, and casualization, the popularity of athletic as well as sport-inspired products for everyday use, continues to expand around the world and keeps broadening from footwear into apparel. In addition, the company said demand for “comfort propositions has accelerated over the last years,” offering very attractive growth opportunities for the future.

Further market share gains leading to high-single-digit top-line growth

The company said it is well positioned to benefit from these industry growth drivers due to its “proven operating model and broad strength across markets, channels and categories.”

“Adidas is confident to continue to take market share around the world and maintain its top-line momentum beyond 2026,” the company said in its guidance statement.

As a result, the company said it expects to grow its currency-neutral net sales at a high-single-digit rate in both 2027 and 2028. With a continued focus on high-quality growth in combination with overhead expense management, the company also anticipates over-proportionate profitability increases. As a result, Operating Profit is expected to grow at a mid-teens CAGR (compound annual growth rate) over the three-year period from 2026 until 2028.

The strong Operating Profit growth is expected to translate into strong cash flow generation over the next three years. This is projected to lead to significantly higher cash returns to shareholders in the form of increased dividends and share buybacks going forward.

In addition to the current share buyback of up to €1 billion in 2026, the Adidas Supervisory Board has authorized the Executive Board to decide at its discretion on additional share buybacks worth up to €1 billion in both 2027 and 2028, subject to the strong cash flow generation materializing as planned as well as to maintaining balance sheet flexibility and strong credit ratings.

“We are lucky to be in an industry that sells consumer products for many segments,” offered CEO Gulden. “We sell products for sport, comfort, lifestyle, and fashion. We are very confident that all these segments will continue to grow all over the world and we are also very confident that we will continue to take market share.”

Image courtesy Adidas AG