Adidas stock trades near yearly high as earnings and margin improve

Adidas stock is trading close to its recent yearly highs as the German sportswear group (ISIN DE000A1EWWW0) benefits from recovering demand, improving profitability, and a focus on core franchises such as Samba and Gazelle. Shares of Adidas, listed on Xetra in Frankfurt and included in the DAX index, have rebounded markedly over the past year as the company worked through inventory issues and refocused its portfolio. For investors, the combination of revenue growth, margin expansion, and disciplined inventory management is now central to the valuation narrative.

Revenue up double digits in fiscal 2023

According to the company’s annual reporting for fiscal 2023, Adidas generated revenue in the high twenty billions of euros, reflecting a return to growth after a challenging prior year marked by supply-chain constraints and the termination of its Yeezy partnership. In that period, the company recorded a year-on-year revenue increase in the mid-single-digit to low double-digit percentage range, underscoring resilient demand across key categories, including footwear, apparel, and accessories. The return to a clearer growth trajectory has been supported by strong performance in lifestyle classics and football-related products, which have offset weaker dynamics in some performance lines.

Operating profitability also improved. Adidas reported that its gross margin in fiscal 2023 expanded compared with the prior year, helped by reduced discounting, lower freight costs, and a more favorable product mix. This margin expansion, measured in several percentage points versus fiscal 2022, translated into better operating profit and net income, even though the company continued to incur one-off costs related to restructuring and inventory clean-up. The shift from loss-making quarters in the prior year to profitable operations in 2023 created a clearer foundation for investor confidence.

Margin decides as operating profit recovers

In the first half of 2024, Adidas continued to show signs of operational recovery, with revenue growth supported by key regions such as Europe, North America, and Asia-Pacific. Year-on-year growth in several quarters was in the high single-digit to low double-digit range, reflecting ongoing demand for classic footwear silhouettes and strong sell-through in wholesale and direct-to-consumer channels. The company highlighted that its direct-to-consumer business, including online and own stores, delivered faster growth than wholesale, lifting overall profitability.

Adidas also underscored a clear improvement in operating profit compared with the previous year’s period. While fiscal 2022 had been hit by Yeezy-related write-offs and inventory provisions, the comparable fiscal 2023 and early 2024 periods showed a meaningful swing back into positive territory, with operating profit increasing by several hundred million euros versus the loss or near break-even level a year earlier. This turnaround has been crucial for the share-price recovery, since investors had previously discounted the stock for uncertainty around the Yeezy exit and inventory risks.

Inventory levels, which had been elevated during 2022, were reduced in 2023 and into 2024, supporting cash flow and reducing the need for heavy discounting. Adidas communicated that inventories declined by a double-digit percentage compared with the prior-year level, reflecting tighter buying and better alignment with end-market demand. Lower inventories helped improve the company’s working capital position and contributed to a stronger free cash flow profile, which the market sees as supportive for potential future shareholder returns.

Guidance and earnings expectations for 2024

For fiscal 2024, Adidas has indicated that it expects revenue to grow at a mid-single-digit rate, with further margin improvement as the company benefits from normalized supply chains and a more favorable product mix. The guidance implies that operating margin could expand by over one percentage point compared with fiscal 2023, driven by higher full-price sell-through, lower freight and sourcing costs, and continued cost discipline. The company also expects net income to rise noticeably versus the prior year, as one-time Yeezy-related effects fade and underlying operations strengthen.

Analysts following Adidas have built consensus expectations around this guidance, modeling revenue growth in the mid-single-digit to low double-digit range and further improvements to operating margin and earnings per share. The consensus view suggests that if Adidas delivers on its guidance, earnings per share could rise by a double-digit percentage compared with fiscal 2023, bringing profitability closer to pre-pandemic levels. This recovery path is one of the key factors supporting the share price, as it implies that the company’s turnaround plan is progressing.

Additionally, Adidas has signaled ongoing investment in marketing and product innovation, particularly around major sports events and lifestyle franchises. While these investments weigh on operating expenses in the near term, they are intended to support sustainable revenue growth and brand strength. The balance between growth investments and margin discipline is therefore central to how investors assess the stock’s risk-reward profile.

Football and lifestyle franchises drive sales

Adidas generates a significant share of its revenue from footwear, where franchise models play a central role. Classic silhouettes such as Samba and Gazelle, along with performance-oriented lines like Predator football boots and Ultraboost running shoes, have contributed strongly to recent growth. In fiscal 2023, the footwear segment accounted for well over half of total revenue, with lifestyle and Originals lines posting double-digit growth in many regions. Football-related products, including national team kits and club jerseys, also benefited from a busy tournament calendar, lifting apparel revenue.

Outside of footwear and football, Adidas has emphasized growth in outdoor and training categories, as well as collaborations with designers and artists that help broaden its appeal. These collaborations, though smaller in absolute revenue terms than core franchises, can generate high-margin limited-edition products and strengthen brand desirability. The company has also invested in digital platforms to support personalization and membership, aiming to increase customer lifetime value and direct-to-consumer sales.

Adidas stock and current market valuation

Adidas stock trades on the Xetra platform in euros and is part of the DAX index, which groups major German blue-chip companies. Over the past twelve months, the share price has risen by a notable double-digit percentage, recovering from the lows seen during 2022, when investor sentiment was weighed down by Yeezy-related uncertainties and broader macroeconomic concerns. The current valuation reflects expectations of sustained revenue growth, margin expansion, and normalized inventory and cash flow.

Market capitalization stands in the multi-billion-euro range, placing Adidas among the larger European consumer and sportswear companies. The price-to-earnings ratio, based on consensus earnings forecasts for fiscal 2024, sits at a level that implies investors are willing to pay a premium for the company’s brand strength and recovery trajectory, but not at the extremes seen during peak years earlier in the decade. For many market participants, the crucial question is whether Adidas can maintain double-digit earnings growth beyond 2024 without sacrificing margin discipline.

For now, the combination of improving fundamentals, a solid balance sheet, and strong brand momentum has helped support Adidas stock near its yearly highs. Future share-price performance will likely depend on how the company navigates competitive dynamics in sportswear, delivers on its guidance, and manages key markets such as North America and China.