Adidas

Adidas is a multinational sportswear company, with about half of its profits coming from emerging markets and only around 10% from the US. The stock is still trading at the levels it reached when the US tariff announcements hit the entire sector back in April. We bought after the second-quarter results were judged as disappointing (-15% move over a few days), but our view was that underlying sales momentum and product development are still looking strong. Companies like Adidas are finding it difficult to provide guidance due to an uncertain tariff impact and the fact that mitigation measures (moving production that is destined for the US to countries facing lower US tariffs) take a few quarters to implement. What is clear is that the wholesale, retail, and ecommerce (direct to consumer) channels of the business are all seeing double-digit YoY growth. Strong results from performance and lifestyle products have boosted the brand's appeal. Next year's expanded 48-team FIFA World Cup will further keep Adidas top of mind. Using reasonable long-term normal margin assumptions (below what management guides to) Adidas is trading on around 15x earnings for 2027 (once all the tariff issues have been fully digested). For a leading global brand, this is very attractive.

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