adidas Rallies in Q1 2025: A Turnaround Anchored in Execution and Strategy

adidas has delivered a resounding signal of recovery with its preliminary Q1 2025 results, showcasing robust revenue growth, margin expansion, and broad-based market penetration. The German sportswear giant’s performance marks a critical inflection point, as it moves past the turbulence of its Yeezy partnership dissolution and navigates toward sustainable profitability.

Ask Aime: What does Adidas' Q1 2025 recovery signal mean for the stock market?

Revenue Surge: Organic Growth and Strategic Clarity

Total revenue for Q1 2025 reached €6.15 billion, a 13% currency-neutral rise from the prior year. Excluding the one-time Yeezy sales in Q1 2024 (€150 million), organic growth soared to 17%, signaling strong demand across all regions and channels. This performance is particularly notable given the exclusion of Yeezy, which contributed €650 million to full-year 2024 revenue. The brand’s focus on full-price selling, localized product launches, and reduced discounting has clearly paid off.

Margins Expand: Cost Discipline and Operational Efficiency

The gross margin improved to 52.1% (up 0.9 percentage points year-over-year), driven by lower product and freight costs, a better product mix, and operational streamlining. For the adidas brand alone, the margin jumped 1.6 percentage points, underscoring its effectiveness in managing input expenses. Operating profit surged to €610 million, with the operating margin nearly tripling to 9.9%, reflecting significant progress in profitability.

This margin expansion is a key milestone. Historically, adidas struggled with excess inventory and markdowns, particularly after the Yeezy split. The current results suggest the company has stabilized its supply chain and inventory management, allowing it to prioritize full-price sales.

Global Momentum: Markets and Channels Fuel Growth

adidas reported double-digit growth in all key regions, including Europe (up 16%), North America (15%), Greater China (13%), and Emerging Markets (19%). Even Latin America, a smaller but growing market, expanded by 12%. The company also saw balanced channel growth: wholesale rose 14%, DTC sales increased 11% (16% excluding Yeezy), and e-commerce surged 17%. This geographic and channel diversification reduces reliance on any single market or sales channel, enhancing resilience.

Strategic Shifts and CEO Confidence

CEO Bjørn Gulden highlighted the brand’s “double-digit growth across all markets and channels” as proof of its renewed vitality. The results align with his strategy to rebuild adidas as a premium, globally relevant brand. Key initiatives include:
- Localized Product Offerings: Tailoring designs to regional preferences (e.g., soccer in Europe, basketball in the U.S.).
- Full-Price Focus: Reducing reliance on discounts to preserve brand equity and margins.
- Sustainability Initiatives: Leveraging eco-conscious materials to appeal to evolving consumer values.

The exclusion of Yeezy, while initially a blow, has also freed resources to prioritize core lines and collaborations.

Outlook and Investment Implications

adidas’s Q1 results set a high bar for the full year. The company’s confidence is reflected in its full-year outlook, which now includes a target of mid-single-digit revenue growth (previously low-single-digit). With operating margins now at 9.9%, there’s room to push toward the high teens or low 20s, aligning with peers like Nike.

Investors should note risks, including macroeconomic pressures in key markets and intense competition from Under Armour and Lululemon. However, the Q1 results suggest adidas is making strategic strides to mitigate these challenges.

Conclusion: A Turnaround Rooted in Execution

adidas’s Q1 2025 results are a testament to disciplined execution. With revenue growth of 17% (excluding Yeezy), a 9.9% operating margin, and momentum across all regions, the brand is proving its ability to recover from setbacks. The elimination of Yeezy’s volatility and the focus on core strengths—product innovation, localized marketing, and margin management—position adidas for sustained growth.

The data is clear: adidas has turned a corner. Investors should watch for the final Q1 results on April 29, but the preliminary numbers already suggest a company well-positioned to compete in a crowded market. For those willing to bet on its turnaround, the stock could be primed for a multi-year rally.

adidas’s recovery hinges on maintaining this momentum. With strong fundamentals in place, the next steps will be critical.