Adidas Forecast Lift Depends on U.S. Tariff Refund

Adidas raised its full-year operating-profit target to €2.5 billion after adding a one-off €200 million U.S. tariff refund to its third-quarter results. Its shares climbed 2.4% in early trading on Wednesday, after the German sportswear group issued unscheduled preliminary earnings that topped market expectations. The earlier target stood at €2.3 billion.

The updated outlook also accounts for a planned €100 million reinvestment in the fourth quarter. Adidas said the refund and reinvestment both form part of the figures supporting its new annual target. The announcement follows a weaker market reaction to the company’s post-World Cup revenue outlook in July.

The Tariff Refund and the Forecast

Adidas reported third-quarter earnings of €1.01 billion, up 37%, including the refund. The result exceeded the €742 million analyst consensus provided by the company. J.P. Morgan analysts said third-quarter operating profit beat expectations by 9% even without the refund.

In a note to investors, Metzler analysts called the update “another compelling proof point of Adidas continuing to expand market share while delivering profitable growth amid a challenging environment.” But Metzler analyst Felix Dennl said the higher forecast mainly reflected the one-off U.S. tariff refund, not stronger underlying trading. He said it might have limited impact on market expectations.

The revised target incorporates the specific refund and the planned reinvestment. Adidas lifted its earlier €2.3 billion target to €2.5 billion. The reported results and analysts’ comments separated earnings that include the refund from operating profit measured without it.

Inventory, Discounts and Product Changes

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

Adidas hoped to build on a strong World Cup showing and stay ahead of Nike and other rivals. The market didn’t respond well to its post-World Cup revenue outlook in July. Now the company faces challenges in its footwear lifestyle business, including inventory levels and discounting.

“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,” Adidas CEO Bjorn Gulden said in a statement on Tuesday.

Adidas shares rose after the earnings update and higher full-year operating-profit outlook. The figures include the €200 million U.S. tariff refund and the planned €100 million fourth-quarter reinvestment. Metzler said the refund explained most of the higher forecast, while J.P. Morgan found third-quarter operating profit 9% above expectations without it. The exchange rate given was $1 = 0.8912 euros.