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Investing.com -- Adidas (ETR:ADSGN) is expected to post strong second-quarter results for fiscal 2025, with sales, margins, and earnings maintaining momentum despite a tough year-over-year comparison, according to analysts at Morgan Stanley (NYSE:MS) in a recent preview note.
The brokerage raised its forecast for Adidas’ group organic sales growth in Q2 to 9.5% year-over-year at constant currency, up from the prior 7.7% estimate and ahead of the 9.1% consensus forecast from Visible Alpha.
Excluding the impact of discontinued Yeezy sales, growth is projected to reach 13.3%. Adidas previously reported 16% year-over-year growth excluding Yeezy in Q1 2025.
Product momentum remains broad-based. The Terrace franchise, led by Samba, Gazelle and Spezial, continues to perform strongly, while newer silhouettes such as the Japan, Tokyo and Taekwondo lines are gaining traction.
Lifestyle running also showed growth, with the Evo SL surpassing internal forecasts by scaling into the millions of pairs sold. Adidas’ performance running segment, including the Adizero, Boston and Adios Pro models, is also contributing to growth.
Gross margin for Q2 is forecast to expand by 65 basis points year-over-year to 51.5%. That marks a slowdown from the 160 basis point gain recorded in Q1 but reflects improvement from the 50.5% gross margin in Q2 2024.
Excluding Yeezy, the margin is expected to rise by 100 basis points. The margin improvement is attributed to stronger full-price sales, a better promotional environment and favorable product and market mix.
Currency effects are projected to remain a mild drag in Q2 due to unhedged sourcing at unfavorable spot rates, though foreign exchange is expected to turn into a tailwind in the second half of the year.
Adidas’ EBIT margin for Q2 is estimated at 9.2%, unchanged from prior projections and ahead of the 8.7% Visible Alpha consensus. In Q1, the company posted a 9.9% EBIT margin.
Full-year guidance remains unchanged, with projected 2025 revenue of €25.2 billion, EBIT of €2.04 billion and earnings per share of €7.51.
Regionally, sales are forecast to increase in Europe by 8.8% year-over-year, in Greater China by 6.7% and in Emerging Markets by 12.9%.
North America is expected to see a 1.4% rise, and Japan/Korea a 9.2% increase. The report indicates that Adidas is gaining share in key markets such as China, supported by a localized go-to-market strategy.