Adidas’s recent strong performance may be facing headwinds after the sportswear giant reported softer-than-expected second-quarter results, raising investor questions about the durability of its turnaround.
The company’s Q2 top line was weaker than anticipated, hurt by sluggish direct-to-consumer sales, a slowdown in its footwear division, and persistent challenges in the European market. The results fueled concerns that the momentum from its popular “Terrace” line of sneakers and refreshed brand image is beginning to fade.
However, analysts at UBS are urging investors not to overreact to a single quarter’s performance. In a recent note, the bank argued that while growth from the Terrace franchise has moderated, newer product lines are beginning to gain traction and should make more meaningful contributions in the second half of the year.
UBS pointed to signs of resilience, noting that European retailers remain optimistic despite the regional weakness in Q2. Adidas management also reported that sales in the region picked up in July, suggesting the dip may be temporary. Furthermore, Adidas (OTC: ADDYY) reiterated its confidence in achieving double-digit growth in all markets outside the U.S., which collectively account for approximately 80% of its sales. Favorable currency hedging is also expected to support earnings into 2026.
Despite this optimism, UBS concedes that a more decisive verdict on the company’s momentum will have to wait for its third-quarter results. The bank maintains a Buy rating on the stock with a price target of €274, stating that at around 24 times 2025 earnings, Adidas trades below the growth implied by its long-term outlook. Still, with market sentiment “on a knife’s edge,” another disappointing quarter could quickly change the narrative.
