Can Adidas Stock Turn Things Around?

Adidas shares have fallen 21% year-to-date, including an 11% drop post-Q2 earnings on July 30, primarily due to significant U.S. tariff impacts that caused a multimillion-euro hit in Q2 and project up to €200 million in additional costs for 2025, particularly from key suppliers like Vietnam. While the company aims to boost revenue by reprioritizing running shoes, investor uncertainty persists regarding its ability to manage these increased costs, prompting advice to await further financial clarity.

Analysis

Adidas (ADDYY) is facing significant headwinds, evidenced by a 21% year-to-date decline in its share price as of early September and a sharp 11% drop following its Q2 earnings report on July 30. The primary driver of this underperformance is geopolitical, with U.S. tariffs inflicting a multimillion-euro impact in Q2 and posing a potential further cost of up to 200 million euros for the remainder of 2025. This projected cost represents a material 3.4% of the company's 5.95 billion euros in Q2 revenue. The risk is concentrated in its supply chain, as tariff moratoriums have expired for key manufacturing hubs Vietnam and Indonesia, with a proposed 46% tariff on Vietnamese goods presenting a severe threat. In response, management is strategically reprioritizing the running shoe category, which a Deutsche Bank analyst notes is a high-growth market segment. The release of two new running shoe models this year signals initial execution on this strategy. However, investor sentiment remains highly negative, with the stock hitting its 2025 low of $95.35 in August, reflecting deep uncertainty about the company's ability to absorb or pass on these substantial tariff-related costs without eroding margins or demand.

Key Decisions for Investors

• Investors should closely monitor developments in U.S. trade policy, particularly regarding tariffs on imports from Vietnam, as this represents the most significant and quantifiable risk to Adidas's profitability.
• The strategic pivot to the running shoe category is a potential long-term catalyst, but its effectiveness in offsetting tariff-induced margin pressure is unproven; track sales data for new product launches as a key performance indicator.
• Given the significant stock price deterioration and prevailing uncertainty over cost management, a neutral or 'wait-and-see' stance is warranted until the next earnings report provides clarity on the company's pricing strategy and margin outlook.