Earnings call transcript: Adidas sees strong Q2 2025 growth amid global expansion

Adidas AG reported robust Q2 2025 results, with its brand revenue growing 12% and gross margin improving to 51.9%, driven by strong regional performance and strategic retail expansion. The company reaffirmed its full-year outlook for double-digit growth and an operating profit of €1.7-€1.8 billion, anticipating significant opportunities from the 2026 FIFA World Cup. However, the stock declined due to market concerns over a potential €200 million impact from new U.S. tariffs in H2 2025, which management aims to mitigate through supply chain adjustments and selective price increases, acknowledging consumer reaction to such changes remains a key uncertainty.

Analysis

Adidas AG (ADS) delivered a robust Q2 2025 performance, characterized by strong underlying brand momentum, yet overshadowed by external macroeconomic risks. Brand revenue grew 12% on a currency-neutral basis, with overall company revenue up 8%, driven by significant gains in the Americas (+15%) and Latin America (+23-25%). Profitability metrics were a key highlight, with gross margin expanding 90 basis points to 51.9% and first-half operating profit surging 70% to €1.156 billion, pushing the EBIT margin to 9.6% and nearing the company's 10% target for 2026. This strength was broad-based, with notable growth in performance running (+25%) and apparel (+17%), alongside a well-managed lifestyle portfolio. Despite these strong fundamentals, the stock declined, reflecting investor focus on a significant new headwind: potential U.S. tariffs. Management has conservatively factored a potential €200 million negative impact into its guidance for the second half, which it nevertheless confirmed, projecting double-digit growth and an operating profit of €1.7-€1.8 billion for the full year. This decision signals confidence in mitigation strategies, such as supply chain adjustments and selective price increases, but shifts the primary risk to the uncertainty of U.S. consumer price elasticity.

Key Decisions for Investors

• Investors should weigh the company's strong operational execution and product momentum against the clearly articulated risk of a €200 million impact from U.S. tariffs in H2 2025.
• The negative stock reaction despite the strong results and reaffirmed guidance may present a buying opportunity for investors confident in management's ability to mitigate the tariff impact effectively.
• Monitor U.S. retail channel data and competitor actions closely in the coming months, as consumer response to potential price increases will be the critical determinant of whether Adidas can protect its margins and sales volumes in its largest market.
• Long-term growth catalysts, including the 2026 FIFA World Cup and continued market share gains in key categories, remain intact, suggesting the current tariff issue is a significant but potentially temporary headwind.