Adidas Stumbles: Investors Question Durability of Brand Comeback

As of August 3rd, 2025, Adidas, the sportswear giant, appears to be facing headwinds in its turnaround efforts. The company's second-quarter results, reported last month, were weaker than expected, denting investor confidence in the sustainability of its recent momentum.

The key issues highlighted in the report include sluggish direct-to-consumer sales, a slowdown in footwear demand, and ongoing challenges in the European market. These factors have raised concerns that Adidas' strong performance in recent quarters, driven by the popularity of its Terrace line and a refreshed brand image, may be losing steam.

However, UBS, the financial services firm, cautions against reading too much into a single quarter. The bank notes that while growth from the Terrace franchise has moderated, newer product lines are starting to gain traction. Additionally, management has indicated that sales in Europe picked up in July, suggesting the dip may be short-lived.

Looking ahead, Adidas remains confident in delivering double-digit growth in all markets outside the United States, which account for around 80% of its sales. The company also expects to benefit from favorable foreign exchange hedging into 2026, providing some cushion for its earnings.

Despite the current challenges, UBS maintains a Buy rating on Adidas, with a price target of €274. The bank believes that the company's long-term outlook remains promising, and the current valuation is below the growth implied by its forecasts. However, with sentiment on a knife's edge, any further stumbles could quickly alter the narrative surrounding the brand's turnaround efforts.