Adidas Holds Back on Profit Upgrade Amid Tariff Uncertainty and Strategic Crossroads

Adidas, the German sportswear giant, delivered a robust first quarter of 2025, with revenue soaring 12.7% to €6.15 billion and operating profit jumping 81.7% to €610 million. Yet, behind the headline numbers lies a critical dilemma: the company has opted not to revise its 2025 financial outlook upward, citing a “range of possible outcomes” fueled by lingering uncertainty over U.S. tariffs. The decision underscores the precarious balancing act Adidas—and its peers—are navigating as geopolitical trade tensions and shifting supply chains reshape the global retail landscape.

The tariff issue is no minor footnote. Adidas CEO Bjorn Gulden warned that rising levies on goods imported from China, Vietnam, and Indonesia threaten to erode margins, forcing the company to delay decisions on pricing and production. While tariffs on Chinese exports to the U.S. have been pared back, the U.S. has turned its focus to Southeast Asia, imposing temporary duties on Vietnamese and Indonesian goods through July. This has left Adidas, which sources 40% of its footwear from Vietnam, in a bind.

The stakes are high. Adidas’s Q1 results were bolstered by strong growth in Europe (up 14%), Greater China (13%), and Latin America (26.2%), but North America—a historically critical market—remains uneven. Sales there grew just 3%, largely due to the phased exit of its Yeezy sneaker line with Kanye West, which contributed €150 million to Q1 2024 profits. Excluding Yeezy, North America would have risen 13%, hinting at underlying resilience. Yet, the U.S. market’s sensitivity to price hikes complicates plans: Adidas acknowledges tariffs will “eventually cause higher costs for all products in the U.S.,” but it cannot yet quantify how that will affect demand or pricing strategies.

The company’s cautious stance is reflected in its 2025 guidance: maintaining high-single-digit sales growth and an operating profit target of €1.7–1.8 billion. Analysts note this range leaves room for downside risk if tariffs escalate. Meanwhile, competitors like Nike (NKE) face similar pressures, though Adidas’s reliance on Vietnam—a key target of U.S. tariffs—adds unique volatility.

Gulden’s strategy to pivot toward faster-growing regions like Europe and Latin America offers a lifeline. But the CEO’s inability to secure clarity on final tariff rates has left Adidas in a holding pattern. “Without knowing the final tariff rate, we can’t make the necessary decisions to offset costs,” he said, hinting at potential delays in reshoring production or investing in automation.

The broader question is whether Adidas’s geographic diversification and brand strength can offset tariff-driven headwinds. Its Q1 results suggest a degree of resiliency: footwear sales surged 17%, outpacing peers, while its core三条纹 (three-stripe) brand retained broad appeal. Yet the company’s profit margin remains under pressure: even with strong sales, operating profit would have been €150 million lower had the Yeezy windfall not been excluded.

Analysts are split. Some argue that Adidas’s 2025 guidance is conservative by design, allowing room to surprise investors later. Others warn that prolonged uncertainty could deter long-term investments in innovation or marketing. The company’s 2024 operating margin of 8.7%—already below Nike’s 13.3%—could narrow further if tariffs force price hikes that alienate U.S. consumers.

In conclusion, Adidas’s decision to hold back on upgrading its profit outlook is a pragmatic acknowledgment of the risks posed by trade policies it cannot control. While its Q1 results demonstrate the company’s ability to navigate a fragmented market—Europe and Latin America are booming, and its core brand remains intact—the shadow of tariffs looms large. Investors should monitor two key metrics: the trajectory of Southeast Asian tariffs post-July and Adidas’s ability to sustain North American growth without relying on Yeezy. If the U.S. government resolves the tariff impasse, Adidas could reclaim its upward momentum. But with geopolitical tensions showing no signs of abating, the path to higher profits remains lined with potholes.

The verdict? Adidas is betting on its geographic diversification and brand equity to weather the storm—but the storm’s duration remains unknown. For now, caution is the watchword.