Adidas AG ((ADDYY)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Adidas AG’s recent earnings call highlighted a generally positive sentiment, with the company showcasing robust financial performance and growth across various markets. The sentiment was buoyed by effective inventory management and operational efficiency, though tempered by challenges such as increased US tariffs and a decline in e-commerce sales. Despite these hurdles, Adidas remains optimistic about meeting its 2025 guidance, although the impact of tariffs continues to be a significant concern.
Strong Revenue Growth
Adidas reported a remarkable 13% increase in currency-neutral net sales, with an even more impressive 17% growth when excluding the YEEZY line. The company’s gross profit improved by over 52%, and EBIT reached €610 million, reflecting a 400 basis point improvement. This strong revenue growth underscores Adidas’s effective strategies in driving sales and profitability.
Geographical Sales Growth
The earnings call revealed growth across all markets, with North America up 13%, Europe 16%, Greater China 14%, and Latin America 27%. Notably, Adidas brand sales increased by 17% excluding YEEZY, highlighting the brand’s strong global presence and appeal.
Inventory Management
Adidas’s inventory increased by 15% to €5.1 billion, with a significant portion consisting of fresh products. This reflects the company’s improved planning and demand management, ensuring that inventory levels are aligned with market needs.
Operating Leverage
Despite a 30% currency-neutral growth, operating overheads grew by only 3%, showcasing Adidas’s operational efficiency. This operating leverage indicates that the company is effectively managing its expenses while expanding its market reach.
US Tariff Challenges
Adidas is facing increased tariffs on imports to the US, which could impact profitability if duties remain or increase after the current 90-day suspension period. This presents a potential headwind for the company as it navigates the complexities of international trade.
E-commerce Downturn
E-commerce sales experienced a 3% decline due to the absence of YEEZY, although Adidas brand sales excluding YEEZY grew by 18%. This downturn in e-commerce highlights the challenges Adidas faces in maintaining online sales momentum.
Potential Pricing Pressure
To offset increased tariff costs, Adidas may need to adjust prices in the US market, which could affect consumer demand. This potential pricing pressure is a critical consideration for the company as it strategizes to maintain its competitive edge.
Forward-Looking Guidance
Adidas remains optimistic about its future, with expectations of continued double-digit growth excluding YEEZY and a confirmed EBIT guidance of €1.7 billion to €1.8 billion. The company is focused on localizing its strategy and maintaining momentum despite challenges such as US tariffs, with footwear leading category growth at 17% and apparel nearly reaching double-digit growth.
In summary, Adidas AG’s earnings call reflected a strong financial performance with significant growth across most markets. While challenges such as US tariffs and e-commerce declines pose potential hurdles, the company remains confident in its ability to achieve its 2025 guidance. The overall sentiment was positive, with a focus on strategic growth and operational efficiency.