Adidas record sales shift the sportswear battle to sourcing margins
Adidas delivered its strongest sales quarter on record, but the market’s reaction shows that record demand is no longer enough. Second-quarter (Q*) revenue rose ** per cent in currency-neutral terms to €*,*** million (~$*.* billion), prompting the company to raise its full-year sales outlook. Yet shares fell as much as **.* per cent intraday in Frankfurt on July ** before closing **.* per cent lower at €***.** (~$***). The trigger was profitability: operating profit rose only *.* per cent to €*** million (~$*** million), below analysts roughly €*** million (~$*** million) expectation. The widening gap between sales and profit growth is shifting investor focus from demand to cost conversion, with marketing, tariffs and freight increasing pressure on sourcing, pricing and supplier productivity.
Cost and margin
Adidas spent €*** million (~$*.* billion) on marketing and point-of-sale in the quarter, up ** per cent year on year, or €*** million (~$*** million) more, supporting its “Backyard Legends” World Cup campaign featuring Lionel Messi, Jude Bellingham and Timothée Chalamet. Marketing rose to **.* per cent of sales from **.* per cent, limiting the revenue growth reaching operating profit. Gross margin improved *.* percentage points to **.* per cent, helped by full-price selling and a stronger direct-to-consumer mix, but operating margin fell to *.* per cent from *.* per cent. Adidas raised its currency-neutral revenue guidance to *–** per cent while retaining its €*.* billion (~$*.* billion) operating-profit target, increasing pressure to control growth-related costs.
