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Adidas AG (ADDYY)
OTHER OTC:ADDYY
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Adidas
(OTC:ADDYY)
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Rating:55Neutral
Price Target:
$86.00
▲(6.20% Upside)
Action:ReiteratedDate:03/06/26
The score is driven primarily by mixed financial performance: strong profit recovery is offset by a pronounced 2025 cash-flow step-down and uneven revenue momentum. Technicals are a notable drag given the clear downtrend and weak momentum indicators. Valuation is reasonable, and the latest earnings call provided supportive guidance and shareholder-return commitments, but with material near-term FX and tariff headwinds.
Positive Factors
Brand & Product Momentum
Sustained 13% adidas‑brand growth and ~€2.8bn operational revenue addition in FY25 indicate durable brand strength and product-market fit. Broad product successes, collaborations and running/football momentum support continued consumer demand and market-share gains across cycles and geographies.
Margin & Profit Recovery
Material profitability improvement and gross‑margin recovery reflect better product mix, pricing discipline and fewer markdowns. Higher structural margins sustain cash generation capacity and self-funding for growth initiatives, making margins a durable lever for multi-year earnings expansion if maintained.
Balance Sheet Repair & Capital Return
Marked leverage reduction and active buyback/dividend increases signal improved financial flexibility and management confidence. A healthier capital structure plus planned returns support long‑term shareholder value and provide room to invest while keeping a disciplined allocation framework.
Negative Factors
Sharp Cash‑Flow Deterioration
A large step‑down in operating and free cash flow materially reduces near‑term financial flexibility, raising reliance on working‑capital improvements or external financing. Persistent cash volatility undermines the durability of buybacks/dividends and constrains reinvestment over several quarters.
FX & Tariff Headwinds
Material and recurring FX translation effects plus non‑mitigated tariff costs directly compress reported growth and operating profit. These structural external risks complicate multi‑year planning, can dilute margin progress, and may persist across reporting periods absent geopolitical or policy changes.
Inventory & Working‑Capital Pressure
Elevated inventories tied up cash and heighten markdown risk in a promotional market. Even if management expects normalization, the working‑capital strain materially contributed to 2025 cash declines and may pressure margins and cash conversion for multiple quarters during destocking.
Adidas (ADDYY) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$28.28B
Dividend Yield1.16%
Average Volume (3M)13.10K
Price to Earnings (P/E)23.3
Beta (1Y)0.80
Revenue Growth11.87%
EPS Growth191.75%
CountryUS
Employees46,045
SectorConsumer Cyclical
Sector Strength84
IndustryApparel - Footwear & Accessories
Share Statistics
EPS (TTM)0.24
Shares Outstanding360,000,000
10 Day Avg. Volume10,007
30 Day Avg. Volume13,102
Financial Highlights & Ratios
PEG Ratio0.34
Price to Book (P/B)5.20
Price to Sales (P/S)1.26
P/FCF Ratio138.40
Enterprise Value/Market Cap0.98
Enterprise Value/Revenue1.12
Enterprise Value/Gross Profit2.17
Enterprise Value/Ebitda8.56
Forecast
1Y Price Target
$137.91Price Target Upside70.30% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering1
EPS Forecast (FY)5.5
Revenue Forecast (FY)$30.52B
Adidas Business Overview & Revenue Model
Company Descriptionadidas AG, together with its subsidiaries, designs, develops, distributes, and markets athletic and sports lifestyle products worldwide. It offers footwear; apparel; and accessories and gear, such as bags and balls under the adidas brand. It sells its products through approximately 2,200 own-retail stores; mono-branded franchise stores and shop-in-shops; and wholesale and its e-commerce channels. The company was formerly known as adidas-Salomon AG and changed its name to adidas AG in June 2006. adidas AG was founded in 1920 and is headquartered in Herzogenaurach, Germany.
How the Company Makes MoneyAdidas generates revenue through multiple key streams, primarily from the sale of athletic footwear and apparel. The company operates a direct-to-consumer model through its retail stores, e-commerce platforms, and online marketplaces, which allows for higher margins compared to traditional wholesale distribution. Additionally, Adidas benefits from licensing agreements and collaborations with various designers and celebrities, enhancing brand visibility and appeal. The company also generates income from partnerships with sports teams and organizations, which often include co-branded merchandise, sponsorship deals, and promotional events. Seasonal product launches, limited edition releases, and collaborations with influential figures contribute to strong sales, especially in the competitive athleisure market.
Adidas Earnings Call Summary
Earnings Call Date:Mar 04, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 29, 2026
Earnings Call Sentiment Positive
The call conveyed a strongly positive operational and financial recovery: broad-based revenue growth, sizable margin and profit expansion, product and brand momentum, improved leverage and active capital returns. However, material near-term headwinds (loss of YEEZY comparables, FX/translation effects, tariffs, promotional pressures, inventory/working capital and regional conflicts) temper the outlook. Management presented explicit FY26 guidance and a multi-year plan with clear mitigation paths, positioning the company as healthy and confident about future growth.Q4-2025 Updates
Positive Updates
Strong adidas Brand Sales Growth
Adidas brand sales grew 13% currency-neutral in FY25 (17%/12%/12%/11% by quarter) and the total company grew 10% currency-neutral (reported +5%). Operational top-line growth for the adidas brand was approximately EUR 2.8 billion in FY25.
Material Profitability Improvement
Full-year operating profit (EBIT) reached EUR 2.056 billion, up 54% year-over-year. Q4 profit was ~EUR 164 million (nearly 3x prior year Q4). Net income rose 67% and basic EPS increased ~76%.
Gross Margin Recovery and Quality of Sales
Q4 gross margin was nearly 51% and the company highlighted full-year margin levels approaching ~52% (excluding YEEZY). Management emphasized disciplined pricing/discounting and improved product/mix as drivers of margin expansion.
Broad-Based Geographic Strength
Multiple regions showed double-digit growth: Greater China +13%, Japan & South Korea +14%, Latin America +22%, Emerging Markets +17%; North America and Europe each grew ~10% in FY25.
Category and Channel Momentum
Apparel grew 15% (outpacing footwear at 12%), Performance +15%, Lifestyle +12%, Running +29% full-year (Q4 +36%), Football +12%. D2C/wholesale mix stable at ~40/60; brick-and-mortar comped and e-commerce showed strong recovery.
Retail Expansion and Inventory Freshness
Opened 247 stores and closed 158 for ~+90 net store openings. Inventory reported up (see lowlights) but 72% of inventory was goods-on-hand (current season) and only ~7% not current-season (factory outlets), indicating recent replenishment rather than aged stock.
Improved Balance Sheet and Capital Returns
Net leverage improved from >3x to ~1.4x. Company proposed a 40% dividend increase to EUR 2.80 per share (payout ~36%) and announced a share buyback program up to EUR 1 billion for 2026 (first tranche EUR 500m; ~EUR 400m executed at time of call).
Mid-Term Growth Roadmap
Guidance for FY26: high single-digit adidas brand growth in local currencies and EBIT ~EUR 2.3 billion. Management reiterated a plan to add ~EUR 2 billion in revenue each year into 2027/28 with an objective of >10% EBIT by FY27/28 and mid-teens CAGR in operating profit.
Product & Brand Momentum
Notable product successes and innovation pipeline: adizero and Evo SL (Running), new Hyperboost foam (40% lighter than prior Boost), stronger apparel designs, momentum in football and basketball visibility, and successful lifestyle collaborations (e.g., Bad Bunny, Pharrell).
Negative Updates
Loss of YEEZY Comparable Sales
FY25 results were impacted by the absence of YEEZY: management estimates lost YEEZY sales of ~EUR 700 million and a material impact on comparability for top line and operating profit.
Significant FX and Translation Headwinds
Reported growth lagged currency-neutral growth by ~5 percentage points in FY25 (≈EUR 1 billion impact). Q4 had an ~8pp gap due to FX and hyperinflation accounting (Argentina, Turkey). Management expects transactional/translation FX to reduce reported FY26 growth by ~EUR 800–900 million vs. underlying.
Tariff/Trade Costs Pressure
Tariffs were a headwind in FY25 (management cited ~EUR 100 million) and FY26 tariffs are expected to be a non-mitigated ~EUR 200 million drag on EBIT; legal/uncertain developments in recent weeks are not included in guidance.
U.S. Market Underperformance
North America grew ~10% but management acknowledged the U.S. business is not yet where it should be, and rebuilding sports marketing, college/leagues relationships and brand credibility in the U.S. will take time.
Inventory Increase and Working Capital Impact
Reported inventories rose strongly (70% reported, 23% currency-neutral). Working capital increased, consuming cash and contributing to lower-than-planned year-end cash; management expects inventory to normalize during 1H26 and end-FY26 below EUR 5.8 billion.
Promotional Environment / Retail Discounting
Management noted elevated promotional activity in parts of the market (Europe/U.S.) driven by retailer behaviors. While adidas maintained discipline, widespread discounting across the market poses margin risk.
Regional Disruption and Store Damage in MENA
Conflict in the Middle East affected operations in Emerging Markets: teams in shelters, one franchise store hit/destroyed, and short-term operational disruptions. Potential logistics/airfreight impacts were also flagged.
Category Weaknesses
Some categories underperformed: Golf slightly down; Basketball was negative through first three quarters and only returned to growth in Q4. Accessories faced earlier U.S. sourcing headwinds (now addressed).
Net Financial Expenses and Tax Variability
Net financial expenses increased (lower interest income from less cash; Turkey hyperinflation effects) and tax rate moved from 26.5% to 24.3% in FY25, but variability remains and was noted as an area to monitor.
Company Guidance
Adidas guided 2026 to high single‑digit adidas‑brand growth in local currencies and an EBIT target of €2.3bn — based on an underlying operational improvement of ~€650m that is offset by ~€200m of non‑mitigated tariffs and ~€200m of FX headwinds (net ~€400m) — and said product/freight effects should be broadly neutral with slight pricing upside; looking further out the company expects to add roughly €2bn of revenue p.a. in 2027 and 2028 (targeting ~10% EBIT in 2027 and >10% in 2028, with mid‑teens operating‑profit CAGR). On capital allocation, the dividend was raised 40% to €2.80/share (≈€500m) and a share buyback of up to €1bn for 2026 was authorized (first tranche €500m, ~€400m repurchased so far), with ~€1.5bn total shareholder return planned for 2026; the guidance does not assume any upside from potential U.S. tariff recoveries.Adidas Financial Statement Overview
Summary
Earnings have recovered strongly from 2023 into 2024–2025, but the overall picture is constrained by choppy revenue (2025 decline) and a sharp deterioration in cash generation in 2025 (operating cash flow and free cash flow fell materially). Leverage is elevated though stable, with rebuilding equity a positive offset.Income Statement
Profitability has improved meaningfully off the 2023 loss, with net income rising from -$75M (2023) to $764M (2024) and $1.29B (2025). Gross profit remains solid in absolute terms, but the revenue trend is choppy: growth was strong in 2024 (+10.5%) and turned negative in 2025 (-3.5%). Margins also appear to have compressed from 2021’s stronger levels, indicating a recovery story that is not yet back to prior-cycle strength.62
Positive
Balance Sheet
Leverage is elevated but not worsening: total debt is broadly stable around ~$5.6B (2023–2025). Equity rebuilt from $4.58B (2023) to $5.77B (2025), which is a positive trajectory, but the capital structure still carries meaningful debt versus equity (around ~1x debt-to-equity in 2024 and higher in 2022–2023). Total assets are relatively steady, suggesting balance sheet stability, though not a particularly conservative positioning.58
Neutral
Cash Flow
Cash generation is the weakest area due to volatility and a sharp recent step-down. Operating cash flow fell from $2.91B (2024) to $566M (2025), and free cash flow dropped from $2.37B (2024) to $217M (2025), with free cash flow down 42.7% in 2025. While 2024 cash conversion was strong, the 2025 downturn raises questions about working-capital or operating consistency and reduces financial flexibility near term.45
Neutral
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 23.83B | 23.68B | 21.43B | 22.51B | 21.23B |
| Gross Profit | 11.23B | 12.03B | 10.18B | 10.64B | 10.77B |
| EBITDA | 2.97B | 2.51B | 785.00M | 1.75B | 3.11B |
| Net Income | 1.29B | 764.00M | -75.00M | 254.00M | 1.49B |
Balance Sheet | |||||
| Total Assets | 20.25B | 20.66B | 18.02B | 20.30B | 22.14B |
| Cash, Cash Equivalents and Short-Term Investments | 1.64B | 2.48B | 1.48B | 966.00M | 3.94B |
| Total Debt | 5.55B | 5.59B | 5.56B | 6.46B | 5.33B |
| Total Liabilities | 14.13B | 14.79B | 13.10B | 14.95B | 14.30B |
| Stockholders Equity | 5.77B | 5.48B | 4.58B | 4.99B | 7.52B |
Cash Flow | |||||
| Free Cash Flow | 217.08M | 2.37B | 2.13B | -1.24B | 2.52B |
| Operating Cash Flow | 565.75M | 2.91B | 2.55B | -543.00M | 3.19B |
| Investing Cash Flow | -443.77M | -356.00M | -450.00M | 495.00M | -424.00M |
| Financing Cash Flow | -848.15M | -1.56B | -1.43B | -2.96B | -2.99B |
Adidas Technical Analysis
Negative
80.98
Price Trends
89.17
Negative
92.35
Negative
101.01
Negative
Market Momentum
-3.07
Positive
33.54
Neutral
22.32
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ADDYY, the sentiment is Negative. The current price of 80.98 is below the 20-day moving average (MA) of 86.25, below the 50-day MA of 89.17, and below the 200-day MA of 101.01, indicating a bearish trend. The MACD of -3.07 indicates Positive momentum. The RSI at 33.54 is Neutral, neither overbought nor oversold. The STOCH value of 22.32 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ADDYY.
Adidas Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
83 Outperform | $14.84B | 7.91 | 41.36% | ― | 12.38% | 18.43% | |
72 Outperform | $6.74B | 32.23 | 13.87% | ― | 18.86% | 88.29% | |
62 Neutral | $3.91B | -57.09 | -5.37% | ― | <0.01% | -77.31% | |
61 Neutral | $18.38B | 12.79 | -2.54% | 3.03% | 1.52% | -15.83% | |
55 Neutral | $28.28B | 23.34 | 23.93% | 1.16% | 11.87% | 191.75% | |
54 Neutral | $79.16B | 30.51 | 18.43% | 2.81% | -5.06% | -47.51% |
* Consumer Cyclical Sector Average
ADDYY
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.