Adidas: Disappointing Guidance Demonstrates Depth of Problems; Shares Fully Valued

Ahead of its full report on March 13, narrow-moat Adidas revealed preliminary 2023 results and initial 2024 guidance below our estimates. While disappointing, the outlook was not surprising given similarly dim reports from peers wide-moat Nike and no-moat Puma. Adidas, like others in its industry, is struggling with excess inventory amid slowing demand for activewear in North America, as well as very unfavorable currency movements. Given that its turnaround continues to be a work in progress, we are lowering our fair value estimates to EUR 163/$88 from EUR 172/$93, leaving shares fully valued.