Adidas Overcomes US Tariffs and Raises Forecasts

Adidas, the world's second-largest sportswear manufacturer, continues to enjoy a wave of success. Unlike its major competitor, Nike, which is grappling with flat sales and declining profits, the German company has raised its annual forecast following a record-breaking quarter. CEO Bjørn Gulden anticipates an operating profit increase to approximately 2 billion euros, up from the previous forecast of 1.7 to 1.8 billion euros, and a significant rise from last year's 1.3 billion euros. Revenue is projected to grow by nine percent on a currency-adjusted basis, reaching the higher end of previous expectations. The Adidas stock turned positive in late trading, closing at 198.25 euros. Analysts had already anticipated an operating profit of around 2 billion euros. The company successfully navigated the challenges posed by US tariffs imposed on most Asian countries producing sports shoes and apparel. In the third quarter, Adidas managed to enhance its gross margin to 51.8 percent from 51.3 percent the previous year, suggesting that the brand has maintained strong customer demand in the US despite higher prices. Adidas reported that it implemented effective measures to mitigate the additional costs resulting from increased US tariffs. The company had previously been cautious about raising its forecast due to tariff concerns. However, the currency-adjusted revenue from July to September surged by 12 percent, excluding sales of the discontinued "Yeezy" shoes by rapper Kanye West, which had generated 200 million euros last year. In euros, the quarterly revenue rose by three percent to 6.63 billion euros, marking the highest quarterly revenue in the company's history. Operating profit jumped by 23 percent to 736 million euros, surpassing analysts' expectations of 694 million euros. Adidas achieved an operating profit margin of 11.1 percent, exceeding the 10 percent target that Gulden had considered the maximum goal. Looking ahead, Gulden expressed confidence in the year's success, highlighting a focus on transitioning smoothly into 2026, a year promising significant sports events such as the Olympic Winter Games and the largest FIFA World Cup ever. Despite a volatile environment due to US tariff hikes and global retail uncertainties, Adidas remains optimistic about its brand's continued popularity and market performance. In early Wednesday trading, Adidas shares fell by more than two percent. UBS analysts noted that the strong stock performance since early September indicated that investors had already anticipated a robust interim report, with shares having increased by nearly 17 percent by Tuesday evening. James Grzinic from Jefferies noted that the anticipated increase in the 2025 EBIT target was more significant than expected, particularly praising the heightened revenue growth target, which reflects impressive price discipline. Felix Dennl from Bankhaus Metzler highlighted that Adidas not only extended its product lifecycle but also established more stable growth. Conversely, Piral Dadhania from RBC offered a more reserved assessment, pointing out that the results were mixed and the upgraded annual outlook aligned with market expectations. Adidas plans to release its final quarterly figures on October 29.