Adidas has boosted sales to a record high. Will it be able to regain investor confidence?

Strong sales of Adidas apparel and sports equipment drove growth in most markets last quarter, the company said in its quarterly report. The German brand needed to prove to investors that its massive marketing spending during the World Cup would yield long-term returns. After the previous report, when it became clear that the marketing campaign had hurt Adidas’s profits, its stock plummeted 17%. Today, it rose 4.2%.

Revenue from clothing sales in the third quarter rose 19% excluding currency fluctuations, while the sports equipment segment posted a 14% increase compared with the same period last year, Adidas reported. The company explained that the drivers of growth were the running, training, and soccer categories.

It reported strong double-digit growth in sales of its Originals clothing line and soccer gear. The brand also notes growing consumer interest in more elegant looks, including corduroy items as well as suede and satin jackets.

Adidas’ total revenue rose 9%, reaching a record €7.3 billion. Excluding the impact of exchange rate fluctuations, revenue increased by 7%. Operating profit jumped 37% to a record quarterly high of €1 billion. As a result, the company now expects full-year profit to reach €2.5 billion—up from its previous forecast of €2.3 billion.

CEO Björn Gulden is urging employees to respond quickly to fashion trends in order to meet customer demands and drive growth. As a result, Adidas has managed to sell a significant portion of its products without discounts, while competitors—including industry leader Nike—have been forced to lower prices, Bloomberg notes.

The buzz surrounding apparel offset the lack of growth in the footwear division, where the casual line continues to face challenges due to excess inventory and widespread discounts across the industry. Adidas stated that it expects this negative impact to ease.

For now, the company is exercising caution regarding the volume of sneakers it releases to the market in hopes of avoiding clearance sales. Nevertheless, the brand is seeing growing interest in its retro Superstar sneakers and new Samba variations, including ballet-style versions and models with double lacing.

A few months after marketing expenses totaling about $1 billion during the summer World Cup triggered a plunge in Adidas’s stock price, the sportswear manufacturer faced the challenge of demonstrating that the investment was paying off, The Wall Street Journal reported ahead of the release of its quarterly results. Deutsche Bank analysts assessed that the brand’s position is strengthening thanks to this campaign. Now Adidas has announced that it has returned its marketing expenses to normal levels and has outlined plans to reinvest approximately €100 million in “initiatives that drive greater operational efficiency” in the next quarter.

“Investors will be pleased to hear that inventory levels [of unsold goods] have risen only slightly compared to last year—much more slowly than revenue,” said Jefferies analyst James Grzinich following the report’s release. Compared to the end of the previous quarter, inventory levels have declined slightly, the company noted.

JPMorgan analysts highlighted Adidas’s outlook for the European market. In the third quarter, revenue in this region fell by 4%—against a backdrop of double-digit growth rates in most markets. However, the company expects Europe to return to growth by the end of the year. The bank believes this outlook should reassure investors.

24 out of 31 analysts covering Adidas stock recommend buying it. The rest are neutral. There are no sell recommendations.

This article was AI-translated and verified by a human editor