- Robust Q4 across board
- But growth to slow this year
- Profit guidance misses consensus
Shares in Adidas (ADS:ETR) dropped 2% to €233.3 in Frankfurt after the sportwear giant signalled that sales growth will slow this year as it laps a strong 2024 which saw the company reap the benefits of a successful turnaround.
Under CEO Bjorn Gulden, the German trainers-to-sports apparel firm has forged a track record of beating estimates, but the group’s conservative outlook proved the catalyst for profit taking on 5 March.
GROWTH PACE TO SLOW
Adidas, which has been winning market share from arch-rival Nike (NKE:NYSE) in recent years, is now guiding towards high-single-digit revenue growth for 2025, which would represent a deceleration from the 12% sales growth delivered in 2024.
Adidas’ 2025 operating profit guidance of between €1.7 billion and €1.8 billion also disappointed the market, falling well short of the €2.1 billion consensus estimate.
Q4 RETURN TO PROFIT
Adidas, whose three-stripe motif is among the most identifiable in the world, swung from losses of €377 million to an operating profit of €57 million in the fourth quarter as footwear sales rose 26% and apparel saw growth across all categories.
In terms of the regions, North America and China returned to double-digit growth, reflecting improvements in the wholesale channel as well as company-owned retail stores, while Adidas delivered impressive growth of 25% in Europe.
WHAT DID THE CEO SAY?
‘Going from single-digit growth at the beginning of the year to 19% currency-neutral growth in a fourth quarter, that in general was difficult for the trade, underlines the strong momentum we currently see for our brand and our products,’ said Gulden.
‘We clearly see that consumers’ and retailers’ interest is growing across both Lifestyle and Performance and across all markets.’
Gulden added: ‘We also feel good about the future, and we see potential to increase our market share in all markets. I think for 2025 we are in very good shape. I am confident we have the product pipeline and marketing plans to continue to drive brand heat globally.’
With a ‘hold’ rating on Adidas’ shares, Jefferies said: ‘We remain alert to the transition away from the Terrace fashion cycle and competing claims for investor interest from the Nike turnaround.’
SHARES TRIPPED UP
Russ Mould, investment director at AJ Bell, commented: ‘Adidas generated impressive growth in 2024, lending some credibility to an ambition of being the top sportswear brand in every market outside the US.
‘However, the shares tripped up as Adidas sees growth slowing in 2025 and it guided for profit levels which fall significantly short of consensus and imply only a relatively modest improvement in margin performance.’
Mould continued: ‘Whether this reflects some sensible conservatism on the part of CEO Bjorn Gulden, under whom Adidas has beaten expectations since taking over in early 2023, or a sign that consumers may be reining in spending, will likely become clear through the course of the year.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
