adidas Q3 Earnings Call Highlights

Key Points

• adidas delivered record third-quarter results: Currency-neutral revenue rose 7% to €7.2 billion, while operating profit increased 37% to €1.008 billion and net income climbed 48% to €711 million. Results benefited from a €200 million tariff refund, though underlying gross margin was approximately 51.5%.
• Performance products, apparel and direct-to-consumer sales drove growth, offsetting pressure in lifestyle footwear amid elevated inventories and industry-wide discounting. Greater China grew 13% and North America 12%, while Europe declined 4% in the quarter partly because revenue shifted into the following quarter.
• adidas raised its full-year operating-profit outlook to €2.5 billion while maintaining its 9%–10% currency-neutral revenue-growth forecast. The guidance includes €100 million in fourth-quarter charges for cost reductions and efficiency initiatives intended to support margins and growth from 2027 onward.

adidas ETR: ADS reported record third-quarter revenue and operating profit, supported by growth in performance products, apparel and direct-to-consumer sales, while management said it remains cautious on the global lifestyle footwear market and discounting environment.

Currency-neutral revenue rose 7% in the third quarter, while reported sales increased 9% to €7.2 billion, Chief Executive Officer Bjørn Gulden said. Year-to-date sales reached €20.6 billion, up 11% in currency-neutral terms and 10% on a reported basis.

Third-quarter operating profit rose 37% to a record €1.008 billion. Net income increased 48% to €711 million, while earnings per share rose 58% to €4.06, aided by the company’s completed €1 billion share repurchase program, according to Chief Financial Officer Harm Ohlmeyer.

Tariff refund lifted quarterly margin

Gross margin reached 54.3% in the quarter, compared with 51.8% a year earlier. Gulden said the result included approximately €200 million in tariff refunds related to amounts adidas had paid in prior quarters. Ohlmeyer said the company’s underlying gross margin was approximately 51.5% during the quarter, supported by pricing discipline, lower discounting and a larger direct-to-consumer contribution.

Ohlmeyer said currency effects from markets including Turkey, Argentina, Japan and South Korea were a headwind, while the euro-U.S. dollar effect was broadly neutral. He added that the U.S. dollar is expected to become a tailwind in 2027, though he did not provide formal guidance for that year.

Marketing spending was reduced by about €60 million in the third quarter after higher-than-planned spending in the second quarter, particularly around the World Cup. Ohlmeyer said adidas continued to target marketing investment at roughly 12% of revenue, with the nine-month ratio at 12.2%.

Operating overheads increased 9%, or €176 million, reflecting growth in e-commerce and retail stores. However, Ohlmeyer said operating overheads remained below the company’s long-term target ratio of 30% of revenue.

Performance and apparel offset lifestyle footwear pressure

Gulden said performance products grew 14% in the third quarter, led by football, running and training. The company also reported growth in specialty sports, golf and U.S. sports, while basketball remains an area where adidas has more work to do.

Running continued to expand, with the category up 19%, according to management. Gulden cited the Adizero range and EVO SL franchise as growth drivers, and said adidas expects further contributions from its Hyperboost comfort offering and the upcoming Supernova range for everyday runners.

Apparel sales increased by almost 20%, with Originals apparel growing by nearly 50% from a lower base. Gulden said adidas has broadened its apparel materials and silhouettes beyond traditional cotton and polyester offerings, including denim and knit products.

By contrast, lifestyle footwear remained challenging amid elevated inventories and widespread promotional activity across the industry. Gulden said adidas is managing supply carefully rather than pushing more product into a discounted market. He said the company expects industry conditions to normalize when supply falls closer to demand, but noted that the timing will depend on the actions of brands and retailers.

“The lifestyle footwear market is currently difficult,” Gulden said, adding that performance footwear growth and apparel momentum help balance the product portfolio.

China and North America lead regional growth

Greater China grew 13% in the third quarter and 15% year to date, with Gulden describing the brand as “on fire” in the market. He attributed the performance to local product development, local sourcing, digital activation and a mono-branded retail model. Management said China’s locally produced product base can support higher margins through shorter development cycles and lower inventory requirements.

North America grew 12% in the quarter and 40% year to date. Gulden said the company has invested more heavily in U.S.-specific sports such as American football, baseball and softball, as well as high school and college sports. He said adidas has substantial room to gain market share in the region and expects to continue growing there even if the broader market remains difficult.

Europe declined 4% in the third quarter but increased 2% year to date. Ohlmeyer said the implementation of the S/4HANA system shifted up to €50 million of European wholesale revenue, or roughly two percentage points of growth, from the third quarter into the fourth quarter. Gulden said Europe’s direct-to-consumer business rose 7%, indicating continued consumer demand despite a difficult broader market.

Emerging Markets surpassed €1 billion in quarterly sales for the first time, although some markets were affected by conflict in the Middle East. Latin America remained strong after the World Cup, management said.

Direct-to-consumer sales outpaced wholesale. Brick-and-mortar retail sales increased 16%, with like-for-like growth of about 13%, while e-commerce rose 18%. Wholesale sales increased 2%, as retailers maintained higher inventory levels and adidas limited new product shipments into highly discounted markets.

Guidance raised as company funds 2027 efficiency actions

adidas maintained its full-year currency-neutral revenue growth outlook of 9% to 10% and raised its operating-profit outlook to €2.5 billion. The guidance incorporates €100 million of fourth-quarter charges intended to lower the company’s cost base in 2027 and beyond.

Gulden said the charges may include write-downs of stores, assets and software systems that could be replaced by artificial intelligence, as well as costs tied to simplifying structures and reducing headcount where appropriate. Without those charges, and including the tariff refund, adidas said operating profit could have reached €2.6 billion.

For 2027, adidas reiterated its expectation for high-single-digit revenue growth and an operating margin of around 10%. The company also continues to expect growth in 2028 and an operating margin above 10%.

Ohlmeyer, who is leaving the CFO role after 10 years and 29 years with adidas, said the company ended the quarter with €1.7 billion in cash despite the €1 billion share buyback. Birgit Kretschmer, who joined the executive board in September, will succeed him at the beginning of next year.

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.

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