adidas ETR: ADS reported a strong start to fiscal 2026, with management pointing to broad-based demand, strong direct-to-consumer growth, and momentum in performance categories—while also flagging ongoing promotional pressure in lifestyle footwear and uncertainty tied to conflicts, tariffs, and energy prices.
Q1 growth and profitability highlighted by management
CEO Bjørn Gulden said adidas delivered roughly 14% currency-neutral sales growth in the first quarter, which he characterized as “very strong” and evidence that product in the market is “in demand of the consumer.” He also called the quarter’s EUR 705 million operating profit one of the highest the company has delivered, with operating profit up about EUR 100 million year over year.
CFO Harm Ohlmeyer added that Q1 sales were up 14% currency neutral and up 7% reported, citing currency headwinds that he said should ease quarter by quarter. He described the “quality” of the growth as strong, noting that direct-to-consumer expansion was a key contributor.
Gross margin impacted by FX and tariffs; marketing set to rise
Gross margin came in at 51.1%, which Gulden said was down about 100 basis points year over year. Ohlmeyer said the underlying business improved versus last year, with pricing “still slightly up” and discounting “under control,” while product cost and freight were “pretty much flat and normalized.”
Ohlmeyer attributed the gross margin pressure to two factors: foreign exchange impacts from several fast-growing markets and U.S. tariffs that “did not exist in Q1 last year.” He said those two items together were about EUR 50 million each, contributing to the 100-basis-point decline.
On spending, Ohlmeyer stressed the company is not “saving” to reach profitability. He said marketing was 11.5% of sales and grew only 1% in Q1, but adidas is intentionally holding spend for key moments and expects marketing to increase in Q2 tied to the World Cup. Operating overhead rose 3%, which Ohlmeyer said reflected retail store annualization and variable supply chain costs, while the rest of the cost base remained “very disciplined.”
Regional performance and channel mix: DTC strength stands out
Gulden outlined mixed regional conditions. He said the company delivered 12% growth in the U.S. despite what he called a “nervous market” with heavy discounting. Europe grew 6% in a market he said is “currently not growing at all,” and he pointed to an over-inventoried lifestyle footwear market that makes full-price growth harder.
In Greater China, Gulden said results were flat year over year but described “great momentum” and “great sell-through.” He also cited strong performance in Japan and South Korea, with South Korea “leading on trend.” Latin America was described as “still on fire,” helped by World Cup-related demand, with Gulden noting adidas is “now number one in the region.”
Gulden also discussed disruption in emerging markets that include Middle East countries affected by conflict, saying the company had seen business losses in those countries “mainly in the last four or five weeks,” including store closures and logistics issues.
By channel, adidas reported growth of 8% in wholesale, 19% in its own stores, and 25% in e-commerce. Gulden said the mix reflects inventory discipline in wholesale amid an over-inventoried market, not a strategic decision to permanently grow DTC faster than wholesale.
In the Q&A, Gulden acknowledged that some retailers “could do more full price sales if they had more of our inventory,” but said heavy discounting in multi-brand retail can make it difficult to launch full-price newness in that environment. He added that adidas might “defend newness” differently than 18 months ago, though he said holding back product for DTC is “not” the company’s normal strategy.
Category trends: apparel surges; performance momentum continues
By product division, Gulden said footwear grew 4%, while apparel rose 31% and accessories grew 13%. He said footwear growth reflects a more promotional lifestyle environment and “lack of newness and lack of energy” at retail, particularly in Europe and the U.S., while performance categories are “taking off,” including running and football.
Performance was up 29% overall, which Gulden said marked the second quarter of strong performance growth. He cited:
- Football growth, aided by supply readiness
- Running growth of nearly 30%, even before the London Marathon “Sub2” achievement
- Training growth of about 12%
- Motorsport strength after expanding from one team (Mercedes) to two (adding Audi)
Basketball was the main weak spot, which Gulden said was expected given seasonality and adidas’ stated need to “reset” the business, alongside softer demand for basketball lifestyle culture.
Working capital, shareholder returns, and guidance
Ohlmeyer said inventories were up 13% reported and significantly higher on a currency-neutral basis, driven by a deliberate decision to build availability ahead of major demand moments. He said without early inventory deliveries, adidas would not have been able to grow 14% in Q1 or expand DTC by 22%. While working capital increased, Ohlmeyer said the company plans to work through inventory over the coming quarters and expects improvement in the second half as the World Cup passes.
On capital returns, Ohlmeyer said adidas completed a EUR 500 million share buyback (repurchasing 3.3 million shares) and plans another EUR 500 million. He also said the company is proposing roughly EUR 500 million in dividends, totaling EUR 1.5 billion in cash returned to shareholders in 2026.
Management kept full-year guidance unchanged, with Gulden saying the company is “very well prepared” for the World Cup and wants to invest behind it. In the Q&A, he said Q1 growth was “about what we planned,” with upside mainly coming from DTC rather than wholesale. Ohlmeyer told analysts gross margin should improve in the second half due in part to currency hedging effects, while operating margin will reflect increased marketing investment in Q2 and typical seasonal profitability patterns.
Gulden also noted a potential upside item tied to tariff repayments following a Supreme Court ruling, saying adidas estimates it could account for roughly EUR 300 million, but emphasized the company has not booked it and has not included it in guidance.
Separately, Gulden announced adidas signed a new partnership agreement with the German Bundesliga through 2034, covering “many, many things, including the ball,” structured using a credit model rather than a traditional payment.
About adidas ETR: ADS
adidas AG, together with its subsidiaries, designs, develops, produces, and markets athletic and sports lifestyle products in Europe, the Middle East, Africa, North America, Greater China, the Asia-Pacific, and Latin America. It offers footwear, apparel, and accessories and gear, such as bags and balls under the adidas brand; golf footwear and apparel under the adidas Golf brand; and outdoor footwear under the Five Ten brand. It sells its products through its own retail stores; mono-branded franchise stores and shop-in-shops; and wholesale and its e-commerce channels.
Further Reading
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Before you consider adidas, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and adidas wasn't on the list.
While adidas currently has a Hold rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
Looking to profit from the electric vehicle mega-trend? Click the link to see our list of which EV stocks show the most long-term potential.
Get This Free Report
