Adidas reports 16% jump in Q1 profit; warns of volatile retail climate

German sportswear major Adidas on Wednesday reported a stronger-than-expected start to the 2026 fiscal year, with operating profits climbing 16% to €705 million in the first quarter. However, the company’s leadership struck a cautious note, warning that a very volatile retail environment and high levels of discounting, particularly in the lifestyle footwear segment, could pose challenges in the coming months.

The Herzogenaurach-based company saw its currency-neutral revenues rise by 14% to €6.6 billion, driven by double-digit growth across most global markets. North America recorded a 12% increase, while Greater China and Latin America surged by 17% and 26%, respectively.

Chief Executive Officer Bjørn Gulden attributed the robust performance to "brand heat" and a strategic decision to "frontload" products ahead of major sporting events, including the 2026 FIFA World Cup scheduled for June. By shipping World Cup-related apparel and footwear early, Adidas aimed to bypass potential supply chain bottlenecks and transportation issues that have plagued global trade in recent years.

"The 22% sell-out growth in our direct-to-consumer (DTC) channel globally... shows that consumers all over the world like what we offer," Gulden said in a statement. He noted that e-commerce revenues jumped 25%, reflecting a sustained shift towards digital platforms.

Despite the top-line growth, gross margins felt the pinch of external pressures, sliding 100 basis points to 51.1%. The company cited unfavourable currency developments and the impact of higher U.S. tariffs as primary detractors. Adidas estimates these factors could weigh on operating profit by approximately €400 million over the full year.

The volatile climate mentioned by Gulden refers largely to the aggressive promotional environment. In Europe, where revenues grew by a more modest 6%, discounting remains at record highs. Market analysts suggest that while Adidas has maintained discipline in its wholesale sell-in to avoid inventory gluts, competitors like Nike have been more aggressive with promotions to clear unsold stock.

Looking ahead, the company is banking on a strong pipeline of innovation to maintain its momentum. This includes the rollout of the Adizero Adios Pro Evo 3 running shoe and the introduction of 3D-printed football and basketball footwear. "We do, of course, hope the environment stabilises and that discounts will normalise, but this is unfortunately not in our control," Gulden added.

Adidas has reiterated its full-year 2026 guidance, projecting an operating profit of around €2.3 billion. This follows a record-breaking 2025 where the brand achieved a net income of €1.34 billion, successfully moving past the era of its Yeezy partnership. The company also confirmed it had completed a €500 million share buyback, with another tranche of equal value planned.

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