Adidas Shares Lifted by Tariff Refund, Not a Boom

Adidas shares rose 2.4% in early trading on Wednesday after the German sportswear group lifted its full-year outlook, following preliminary earnings that beat market expectations. But the improved forecast mostly reflects a one-off U.S. tariff refund, not stronger underlying trading, according to Metzler analyst Felix Dennl. The market rewarded the headline quickly; the reason sits in the small print.

Adidas now expects annual operating profit of €2.5 billion, up from its previous target of €2.3 billion. That calculation includes a €200 million U.S. tariff refund in the third quarter and a planned €100 million reinvestment in the fourth. The company released its preliminary earnings update outside the scheduled timetable, and shares rose after it revised its outlook.

A refund does the heavy lifting

Including the refund, Adidas’ third-quarter earnings rose 37% to €1.01 billion ($1.13 billion), beating the analyst consensus of €742 million provided by the company. Excluding the refund, third-quarter operating profit came in 9% higher than expectations, J.P. Morgan analysts said. Those figures tell different stories. One counts the refund that lifted the forecast; the other leaves it out.

Metzler analysts called the update “another compelling proof point of Adidas continuing to expand market share while delivering profitable growth amid a challenging environment”. Dennl, though, said the higher forecast mostly reflected the one-off refund and might have limited impact on market expectations. The headline number got stronger, but the analyst’s qualification points back to what drove the upgrade.

Inventory, discounting and the next shoe

Adidas has invested in new styles as the popularity of its Samba and Gazelle sneakers gradually fades. The company launched the Adizero Adios Pro Evo 3, described as its lightest-ever racing shoe. Kenyan runner Sabastian Sawe wore it when he broke the two-hour marathon barrier in April.

Adidas had hoped to build on a strong World Cup showing to stay ahead of Nike and other rivals. Its post-World Cup revenue outlook in July disappointed the market. CEO Bjorn Gulden described the current pressure in a statement on Tuesday: “The footwear lifestyle business is currently challenging, mainly due to too much inventory and too much discounting in the marketplace, but we know this will soon normalise again.”

That’s the company’s account: excess inventory and discounting are the problem, and normalisation is expected. The earnings update also makes clear that a tariff refund helped push the annual operating-profit target higher. Adidas is competing with Nike and other rivals as it refreshes its styles; investors are judging that effort through earnings expectations and the share price.

The exchange rate given with the earnings figure was $1 = 0.8912 euros. For investors, the update brought a higher operating-profit forecast and a rise in early trading. For the underlying business, the company’s own statement points to a footwear lifestyle operation still facing too much inventory and too much discounting. The refund supplies a substantial part of the improved outlook; the promised normalisation remains the CEO’s expectation.