Adidas Earnings: Profitability Improvement Affirmed; Shares Fairly Valued

Adidas’ third-quarter results and outlook matched its announcement on Oct. 17 (see our note). As expected, the firm benefited from the sale of about EUR 350 million of its discontinued Yeezy shoes in the quarter, as well as some improvement in its underlying business trends, including 10% currency-neutral growth in owned retail. We do not expect to make any material revisions to our EUR 172/$90 fair value estimates, leaving shares fully valued. Although it has had some issues, including the Yeezy controversy, difficulty recovering from the pandemic in China, and a CEO change, we believe Adidas’ narrow moat rating based on a brand intangible asset is intact and expect the firm to benefit from the global growth of activewear.