adidas Rides the World Cup Wave, But Two External Storms Loom

Q1 2026: A Historic Start, but a Complicated Forecast

adidas entered 2026 with a bang. The World Cup product engine is humming, the sub-2-hour marathon achievement in London electrified the brand, and currency-neutral sales grew 14% in Q1, the first clean quarter without any Yeezy or easy-comparison distortion. As Bjorn Gulden noted, a portion of that growth was deliberately front-loaded: “growth in Q1 around 14% is, I think, very strong” — Bjorn Gulden, CEO · 2026-05-02 — and it validated the decision to invest early in inventory. But the call was equally defined by two external drags: the still-unclear path to federal IEEPA refunds and a fresh Middle East conflict that has already clipped sales.

On the surface, the numbers are excellent: apparel grew 31%, DTC was up 22%, and the operating margin hit 10.7% (EUR 705 million). But Harm Ohlmeyer was careful to explain the gross margin decline of 100 basis points to 51.1% — driven by FX and tariffs — while stressing that the underlying business is improving. The quality of the top line, with 22% DTC growth, is a clear signal that the brand's pull remains strong even as the wholesale market is stuck in a Lifestyle Footwear discount spiral in Europe and the U.S.

The World Cup Bet and the Inventory Pile

Bjorn framed the quarter as the start of a World Cup-driven surge. “Without that availability and the early deliveries in inventory, we would not have been able to grow 14% in the first quarter, and we would not have been able to grow 22% in our direct-to-consumer business.” — Harm Ohlmeyer, CFO · 2026-05-02 That is the trade-off: inventory is up 13% (17% currency-neutral) and working capital is up 21%, but the company explicitly chose availability over capital discipline. The payoff is visible in reorders and the ability to capture demand in DTC, where like-for-like sales are growing double digits.

World Cup-related sales reached roughly EUR 250 million in Q1, and management expects a similar amount in Q2. More importantly, the cultural momentum around soccer merchandise extends far beyond official jerseys. The Running lifestyle and performance categories are also enjoying a halo effect, with running up 30% and training up 12%. This is part of a deliberate broadening strategy, a contrast to the single-franchise risk of prior years. As Bjorn explained in the prior call: “when you look at the business, you can't just plug in that business and saying everything is equal” — Bjorn Gulden, CEO · 2026-03-04 — the company is building a multi-vector growth engine.

Tariffs, Refunds, and the Middle East

The elephant in the room is the Supreme Court decision on non-bilateral tariffs. Management has been publicly cautious about booking any benefit, and indeed the guidance remains unchanged. As Bjorn put it:

There are some uncertainties in some of these numbers. We have not put that into neither our numbers. So we haven't booked any or we have not put anything into our guidance.

On the Middle East, the picture is starker. The conflict started midway through Q1, and the company lost around “EUR 30 million in sales in the quarter, up and down” — Bjorn Gulden, CEO · 2026-05-02. Bjorn warned that if the situation persists, the next quarter could bring a EUR 50-60 million profit hit. While that is manageable relative to the EUR 2.3 billion operating profit target, it adds another layer of uncertainty to a year already complicated by FX and input cost inflation.

Execution, Innovation, and Capital Returns

Beyond the macro noise, adidas continues to execute on its strategy. The new comfort area (Hyperboost foam) is being pushed across performance and lifestyle, and the company is even launching a dedicated walking category — a smart way to tap an aging but active consumer base. The Bundesliga deal (signed on a credit basis rather than a cash payment) highlights the brand's ability to secure premium assets without straining the balance sheet.

Shareholder returns remain a priority: the EUR 500 million buyback is complete, another EUR 500 million is planned, and the company will propose a EUR 500 million dividend, returning EUR 1.5 billion this year. This is a sign of confidence, even as working capital pressure builds. The company also reiterated its mid-term ambition of adding EUR 2 billion in sales every year while driving the EBIT margin above 10%.

The Lifestyle Running segment is one to watch — it is where the next leg of growth could come from, especially in the U.S., where the running specialty channel is rebuilding. The sub-2 marathon served as a powerful proof point, and the innovation pipeline (printed shoes, adaptive footwear, F50 Hyperboost) gives management confidence that the brand can sustain momentum. The question is not whether adidas can sell product — the DTC numbers prove it can — but how much the external shocks will dent the P&L before the World Cup surge truly arrives.