Adidas AG shares tumbled to a three-year low after the sportswear maker's earnings forecast disappointed investors hoping for bigger profits from the German brand.
The company expects an operating profit of around €2.3 billion ($2.7 billion) this year, it said Wednesday, well shy of analysts' estimates.
The shares fell as much as 8.3% to the lowest since January 2023. They are down about 43% in the past year.
In a bid to reassure investors, Adidas extended the contract of Chief Executive Officer Bjorn Gulden — the architect of the company's revamp of recent years — through 2030 and elevated Egyptian billionaire and Aston Villa Football Club co-owner Nassef Sawiris to supervisory board chair, replacing Thomas Rabe.
Gulden needs to show investors that Adidas is in a new era of sustainable growth after capitalizing on demand for fashion-oriented retro sneaker models like the Samba and Spezial. Now in his fourth year as CEO, he is looking to empower staff in local markets and to derive more earnings from performance running and football products.
While the profit forecast will cause many investors to trim their expectations for the brand this year, some analysts noted that the company's management team has a history of setting the bar low.
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“Ever since Bjorn Gulden was appointed CEO, full-year profit came in (relatively significantly) ahead of initial guidance,” Edouard Aubin, an analyst at Morgan Stanley, said in a note.
Adidas presented midterm targets calling for currency-neutral net sales to grow at a high-single-digit rate in 2027 and 2028, and operating profit to expand by a mid-teens compound annual growth rate over that period.
The midterm profit target comes in a bit below analyst estimates, but does allow Adidas to make good on Gulden's goal of reaching a 10% Ebit margin over time, Piral Dadhania, an analyst at RBC Capital Markets, said in a note.
Photo Credit: Bloomberg
Investors have been skeptical about Adidas's ambitions — along with the growth prospects for the broader sportswear industry — at a time of growing economic and geopolitical uncertainty. Adidas has benefited in recent years from the stumbles of Nike Inc., though the US rival's rebounding efforts could ratchet up the competition.
While riding the boom for its retro sneakers, Adidas has sought to streamline operations at its corporate headquarters in Germany and enable more decision-making on marketing and distribution efforts from its teams in different countries. Such efforts are now paying off in Greater China, where revenue expanded by 15% in the fourth quarter.
Adidas also pledged to boost returns to shareholders through higher dividends and share buybacks — and proposed a 40% increase in the dividend to €2.80 per share for 2025. The company authorized new share buyback programs worth up to €1 billion in both 2027 and 2028, which will complement the current program that it launched last month.
Sawiris, the new supervisory board chairman, currently owns a 3% to 3.5% stake in Adidas, according to a company spokesman, and has been on the board since 2016. The 65-year-old — the largest shareholder in Dutch fertilizer producer OCI NV — has an estimated fortune of $9.5 billion, according to the Bloomberg Billionaires Index. He recently decamped from the UK after the scrapping of its system of tax breaks on wealth generated overseas.
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Rabe has served as chairman since 2020. He poached Gulden from crosstown rival Puma SE in late 2022 following the tumultuous demise of Adidas's Yeezy partnership with the rapper and designer Ye.
Since arriving in 2023, Gulden has sought to better manage its lifestyle products and increase the innovation of its sporting goods, especially for running. That category saw sales grow by 29% last year, Adidas said.
Adidas's operating profit this year will likely be dented by a €400 million hit from unfavorable currency swings and US tariffs, the company forecast.
Gulden is looking to get a boost this spring and summer from the football World Cup in North America. Sales will probably grow at a high-single-digit rate this year at constant exchange rates amid market share gains in all regions, the company said.
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