Adidas AG Earnings Call: Strong Growth Amid Challenges

Adidas AG ((ADDYY)) has held its Q4 earnings call. Read on for the main highlights of the call.

Adidas AG’s recent earnings call painted a picture of robust financial health, underscored by impressive growth across various markets and successful product launches. Despite facing challenges such as the discontinuation of the Yeezy line and potential market volatility due to tariffs, the company’s strategic initiatives and operational improvements suggest a positive outlook for the future.

Strong Revenue Growth

Adidas reported a remarkable revenue of €23.6 billion for 2024, reflecting a 12% currency-neutral growth. The company’s gross margin improved significantly to 50.8%, a 330 basis point increase, highlighting effective product placement and a reduction in discounting practices.

Market Performance

The company experienced double-digit growth in all markets except Japan and South Korea. Notably, North America saw a substantial increase in Q4, and Greater China experienced a 10% growth, showcasing the brand’s strong market presence.

Innovative Product Launches

Adidas launched several successful products, including the Terrex shoes, Samba, Gazelle, and the new Evo SL running shoes. These products have been met with high demand, contributing to the company’s strong performance.

Partnerships and Sponsorships

The company secured key partnerships with entities such as Mercedes AMG Petronas and sports figures like Bonmati, Yamal, and Travis Hunter. These alliances have enhanced brand visibility and market penetration.

Operational Efficiency

Adidas achieved significant improvements in operational efficiency, reducing operating working capital from 25.7% to 19.7%. This indicates effective management of inventory and receivables.

Sustainability Achievements

The company made notable progress on its ESG goals, reducing carbon intensity per product by over 5% and achieving nearly 100% recycled polyester usage, underscoring its commitment to sustainability.

Impact of Yeezy Line

The discontinuation of the Yeezy line posed a challenge, as it contributed €650 million in revenue that will not recur in 2025. This presents a significant gap that the company will need to address.

South Korea Warehouse Issue

A warehouse roof collapse in South Korea affected merchandise availability, impacting growth in that region. This incident highlights the importance of infrastructure resilience in supply chain management.

Complexity Reduction

Adidas plans to reduce complexity by removing 500 roles at its headquarters, indicating a strategic move towards internal restructuring to streamline operations.

Potential Tariff Impacts

Uncertainty around potential U.S. tariffs on Chinese imports could impact retail volumes and create market volatility, posing a risk to the company’s future performance.

Forward-Looking Guidance

Looking ahead, Adidas provided a detailed outlook for 2025, projecting an operating profit between €1.7 billion and €1.8 billion. Despite the absence of €650 million in Yeezy revenue, the company anticipates double-digit growth in the Adidas brand, particularly in North America. The gross margin is expected to improve beyond the 50.8% achieved in 2024, driven by better product costing and reduced discounting. Adidas plans to maintain marketing spend at around 12% of sales while focusing on reducing overhead costs to achieve a 10% EBIT margin by 2026. The company emphasized its flexibility to adjust production and capacity in response to market volatility, with a positive order book outlook extending into Q3 2025.

In conclusion, Adidas AG’s earnings call reflected a strong financial performance with a positive outlook for the future. Despite challenges such as the Yeezy line discontinuation and potential tariff impacts, the company’s strategic initiatives, market performance, and operational improvements position it well for continued growth. Investors and market watchers will be keen to see how Adidas navigates these challenges while capitalizing on its strengths.