adidas AG (PNK:ADDYY) Q1 2025 Earnings Call Transcript

adidas AG (PNK:ADDYY) Q1 2025 Earnings Call Transcript April 29, 2025

adidas AG beats earnings expectations. Reported EPS is $1.28, expectations were $1.27.

Operator: Ladies and gentlemen, welcome to the adidas AG Q1 2025 Conference Call and Live Webcast. I am Maura [ph], the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it’s my pleasure to hand over to Sebastian Steffen. Please go ahead.

Sebastian Steffen: Thank you very much, Maura [ph]. Good evening, good afternoon, good morning, everyone, wherever you’re joining us today and welcome to our Q1 2025 results conference call with our CEO, Bjørn Gulden; and our CFO, Harm Ohlmeyer. Before Harm and Bjørn will talk you and take you through the puts and takes of the quarter and explain our expectations for the rest of the year. I would like to ask you, as always, once again to limit your initial questions to 2 during our Q&A session in order to allow as many people as possible to ask their questions. Thanks very much. And now before I’m going to hand over to Bjørn, we will start with a video to get everybody in the right adidas mode. Let’s go. [Video being played]

Bjørn Gulden: Yes, hello, also from me. I hope that you enjoyed the video showcasing the feeling we currently have in the brand. The picture you see on the screen, you probably don’t know but it’s Bad Bunny, our hero in the Latino countries. And he is helping us selling a lot of different products. Also low profile, as you can see on this picture, we have talked about low profile for a long time. Having now also moving into the main consumer and then also helped by an artist like Bad Bunny. But mostly, we are a sports company. And those of you who followed us this weekend, we had a fantastic weekend first with the Road to Records on Campus, where we had about 200 professional athletes running different distances and as you can see, even setting world records, national records.

And then we also celebrated together the adidas family, we had 2,500 people running 5Ks in different speeds. And again, it showcases the enormous power of what we are doing and the spirit we are creating here on our fantastic Campus. But even better was what happened then in the other competitions, you probably saw that we won both the men’s the women’s London Marathon and where Assefa actually won with a new world record. In addition to that, I think we won both in Madrid and Hamburg. So there’s no doubt that we currently not only have the best athletes but also probably the best shoes. And of course, that is very, very important for us. Important is also that, as we promised you, we feel we had a very strong first quarter. To be honest with you, it was actually stronger than we expected, I think partly because we have very good product that we have launched; and secondly that both the brand heat and the operation in the different markets is actually working better and better.

And that’s despite, of course, the challenges that we have talked about and has now been accelerated by the U.S. tariffs. We will be back to the tariff issue at the end of presentation. The numbers, I’m sure you’ve seen many times but of course, we have to give them again. Net sales reported currency-neutral of 13%. If you look only for the adidas brand and take YEEZY out, it was even 17%. Very proud of the development of gross profit, more than 52%, up almost 100 basis points. If you look at all the adidas business, up 160 basis points. And again, it showcases again the strength of the current line and the fact that we’re able to sell it boldly to see and with a wholesale partner but very little discount compared to what has been done before.

So that all gives us then the EBIT or the operating profit of €610 million which is then almost a 10% that we talked about we would like to achieve in our business model and as you can see, almost a 400 basis point improvement. And again, I know it’s only a quarter and I also know we’re only 2 years into our 4-year plan but I think you can see that in a decent quarter with decent operations, we are able to deliver 10% EBIT. Of course, we will not do it this year but we think in the midterm, we are actually able to do that. And I think the first quarter actually is a proof that that is achievable. We are a sports brand and the culture that are born from it but performance is very important for us. So we have talked about this for a while that we changed to you about this.

We have been running the activations and a lot of campaigns over the last 3 months. And what is very, very important is this local execution. I think you all agree that the world has become more local and that’s why we have put a lot of energy on talking to the consumer locally. That means in the global frame of the campaign but always in the mind of hitting the consumer with what is locally relevant. And I think you see those examples here on the screen. Same thing goes for performance. Although we have a huge, I would say, heat on the lifestyle side, our performance launches have become more and more important. And we are in all the category launches, launching products that are both innovative and good-looking, meaning that we are taking share.

Here, the same thing, the sports that are relevant are not only the big sports but also the longer sports. And we have the same strategy in our product offer as we have in our marketing offer that we allow the markets then to focus on what is important for them and are executing that as good as we can. In general, we have said it for a while that visibility in sports is important. And when we are visible in competition, we should also talk about it. That’s why the digital content is important. And if you follow us or you follow sports in general, you will see that Three Stripes in our logo, in our athletes are more visible than ever. And that’s a clear strategy that we think is currently important. But as said, brand heat and the culture born from sport is important and we also know the industry would never be as big if it was only performance.

So lifestyle is very, very important on the commercial side. Same thing here since 18 months, you know we have changed the visual language of our lifestyle business. We have simplified the T4 logo. And it’s the same theme here. We have a language which is global but the execution is extremely local. And when you look at this issues, you see the energy that the different markets are doing and the different tools and the different avenues they take extremely proud of the local energy when it gets to actually pushing the brand for the right culture locally. And the same thing here, you cannot create brand heat if you don’t create a lot of new products. We have, of course, certain franchises that are doing extremely well. But the heat is being created by updating the franchises, by giving new materials, by doing limited editions and of course, a lot of collabs and activities that we had in the last 3 months has been very, very, very high.

And it is the same thing here, very strong activation locally both when it gets to the product and of course, also the activations around the product. On this screen, you have to notice one thing, up in the right corner, you see animal print. Every style that is currently going lifestyle-wise with animal print is doing extremely well. And it’s one of those small things that you’re actually creating an enormous heat right now and where we have probably been leading the trend. When you then look at the sales numbers, again, very, very happy to see that all markets are growing. North America, you see the adidas brand up 13%. The whole business up only 3%. But that is, of course, that we missed the YEEZY business that we had a year ago. And as you know, the more YEEZY business, there’s no more inventory.

That whole thing is history. Europe on top of very strong growth over the last 18 months, another 16% for adidas brand. Greater China up 14%. There’s no doubt that our Chinese team are taking market share, extremely happy with the development there. Japan and Korea, we talked about that we were a little bit skeptical about the Korean business because of the destroyed warehouse and the trapped merchandise. They have been able to turn the business into growth despite this. Although we have a couple of million units actually trapped in warehouse but same here. And the brand is trending positive in both the 2 trended markets in Asia. LatAm, been on fire for a long time, same this quarter with us 27%. And the same goes for the emerging markets being up 25%.

So all in all, currency-neutral up 13% and adidas up 17%. And as I said, higher than we had planned, higher than we expected but of course, also an attribute again to the great work that our teams are doing. We look at the channel wholesale of 18%, of all retail stores of 13%; e-com, down 3% but you see that excluding YEEZY and main adidas brand, up 18%. And this is, of course, the €150 million we sold in March last year of the YEEZY product that is missing. And as you can see, a very strong development digitally than for the adidas brand. That gives us the 65-35 split this quarter. Again, this varies from quarter-to-quarter depending on where the consumer is. And as you can see this quarter, brick-and-mortar then growing stronger than e-com that gives the 21-14.

I’m sure that when you get to next quarter, the wholesale business will probably be a little bit lower in the D2C higher but that’s the fluctuation that you see. We don’t have a global target for this balance. We will in the individual markets be where the consumer is. And as you can see, that is currently then between 60-40 and 65-35. We continue to invest in our bourgeoisie flagship stores and stores in general. I think we have opened around 70 stores in the last 12 months, opened net 70 stores. We have opened, I think, 230 and closed around 160. And as you can see, we really tried to modernize our fleet. The last one we did was actually in Las Vegas, I think you see it here on the screen, on Friday. And showcasing the brand with great stores and great merchandise is, of course, part of the strategy and that will also continue.

We it gets to the division, Footwear leading again with growth of 17%. Apparel gone from almost negative numbers to now almost double digit and accessories also now following the trade at plus 10%. Again, we are starting to sell more apparel and there’s more demand for apparel. But as we said many times, we need to manage apparel more carefully because of all of the apparel in the market and all the discounts. But again, you start to see that getting close to double-digit growth as well. That gives you the almost 60% split footwear and non-footwear, 61% footwear, 32% apparel and 7% accessories. I think you all agree that is a very healthy, I would say, split. That was kind of the intro and then I hand over to Harm, who will take you through the details of the quarter financials.

Harm Ohlmeyer: Thanks Bjørn and good afternoon, good morning from my side as well. And as always, I shed some more light into the P&L and the working capital and the balance sheet. And as you’re very familiar with the P&L already as we preannounced last Wednesday, I give you just the highlights of the net sales again. Bjørn talked about it, so 30%, both nominal and currency-neutral growth. And again, very clearly, the adidas brand growing 17% which is a more meaningful number. And again, for the last time we talk, excluding YEEZY that’s why it’s 17%. The same, you also see on the gross profit that you could compensate for the margins that we generated with YEEZY last year as well. So we are 90 basis points up. And if you look at the adidas brand, again, an indication for the future, we are actually 160 basis points up.

How did we do that with some more details? Of course, as we are selling more and drive more volume, also our factories in Asia and a better planning for these things, so the product costs are favorable for us. Trade has been planned better and has normalized. So there was a slight positive again in Q1. The business mix and the currencies have been neutral. We continue to have strong demand from the consumers and from the retailers out there. So the promotional cadence has been limited. So that has been a positive as well. And then as you can see, YEEZY, of course, is a negative but could be fully compensated. And again, FX since some quarters has been neutral. Going to continue with that one. We keep investing into marketing. As we said, always plan your models around 12%.

You see here, it’s almost €90 million more in absolute terms, 14% up. Even more important is the operating overheads. I know we had €200 million of one-offs in ’23 and €200 million of one-offs in ’24 again. But now as we are driving towards a healthy company and being a good company and then ’25, you see that the leverage is coming now. It’s pretty meaningful in the first quarter with 3 percentage points, only 3% growth despite the 30% currency-neutral growth that we have. And we always said that we have an infrastructure and organization that can cater for €30 billion business. So that where you see that for the first time in a very solid way in Q1. That, of course, leads to a significant operating profit and Bjørn mentioned it, 9.9% is, of course, not 10% but a good indication that we are clearly on a progress to be a good company and this shows the potential to be a healthy company in ’26.

Yes, only 1 quarter but more to come. So it gives us a lot of confidence, regardless of the tariffs, that we are on the right track to become a healthy company again. When you become a good company, again, you also see in the more details when I go below the operating profit which is probably news from today when I give you the details towards the net income that the financial income has normalized. We actually participate also on the cash on the balance sheet that we get some interest on, so 41% more on the income. And even more important, we are avoiding some of the expenses that we had last year. I mentioned that last year, we had some repatriation of cash from countries in Latin America. And of course, we had to deal with hyperinflation accounting treatments here and financial expenses primarily for Argentina and Turkey.

That is largely behind us, at least not in the dimension that we had last year. And you see also here the normalization. That’s what we always say, going forward, if you have a net financial expenses of €30 million a quarter, it’s probably something you can play around in your models. That leads to a significant increase of 139% in the IBT. And then also the taxes, what we kept saying when we have a normalized profitability, we get it to a normalized tax rate again, around 25%. That leads to a significant increase of the net income of 155% to €436 million and the basic earnings per share of €2.44. That’s the P&L. When I come to the balance sheet, you’ve seen the inventory is up 15%. This is again according to the plan as we want to be a growth business, especially with the adidas brand.

We said we want to grow in double digits. So that is just needed in order to fuel the growth and the demand that we have in the future. When you look at that from the development point of view, as Bjørn said, YEEZY is behind us. You still see that last year, we had some YEEZY stock still in our balance sheet. We finished with €5 billion at the year-end, now at €5.1 billion. And it’s still probably slightly growing into the future. Also linked somewhat to the tariffs that some will come, some we don’t know but expect that to grow slightly as well to the end of Q2. But again, no worries. The aging is very, very solid fresh product and it’s definitely a benefit right now to have that inventory, especially in the U.S. When it comes to receivables, that is a reflection of the growth that we have with our retail partners.

You have seen that we are growing significantly with our retail partners and that is reflected in the accounts receivables. The same on the accounts payable, that is reflecting what we owe our suppliers in Asia. That gives you an indication also that we are sourcing much more, not just in value but also in volume. Of course, that is reflected in the inventory, as you have seen earlier. That all leads to operating working capital. That went up slightly as well but that’s where it’s probably more important to look at the ratio. We always said we are a healthy company, dropped below 20% of operating working capital over net sales. If you’re around 20% to 22%, we are a good company. And as we are building up inventory for the future growth, expect it to be slightly above 20%.

But again, a healthy company means that’s our ambition to be below 20%. So also that very, very good development and very, very strong on the balance sheet. That’s being rounded up with cash and cash equivalents €1.4 billion. You might remember that we finished with around €2.4 billion at year end. We used that to invest in the working capital for the future growth. But on a like-for-like from last year, €400 million up or 32%, also very, very solid development. And also good to have that in a volatile environment that we are maneuvering through with confidence. That shows you on the left-hand side that we are making progress on the cash, on the balance sheet and more to come. And of course, the same thing, adjusted net borrowings are going down as we keep paying back our long-term debt through our bonds that we have taken in the past.

So that is also according to plan. And our rating agencies, Standard & Poor’s and Moody’s, will be quite happy to see the next chart because also we came down from a level — net leverage ratio from 4.7x in Q1 ’23 to now 1.6. And our internal target is to always be below 2 in our financial policy. So we have some flexibility but that shows you that not the P&L is in good order but the balance sheet is in good order as well. And that is — we are well set up for the future. And with that, handing over to Bjørn again.

Bjørn Gulden: Thanks, Harm. So that explains to you where we are currently after the quarter. Harm explained where we are after 1 quarter. We have 2 more years to go before we are kind of at the end of this phase of our plan and it’s standard to tell you where we think we are going. First of all, I think you agree, we feel we are and have been the hottest brand for a while. It started, of course, with the tariffs but you also know it’s not only the tariffs. We have extended the Samba, Gazelle and into Campus and SL72. And again, for those of you who think that this is the interest, don’t worry, the heat of these 5 is being managed. And of course, if you now go into the regional environment, you will see that we’re selling on a much wider scale than what we did about 12 months ago.

The next thing in the marketplace that you will see grow is low profile, talked about it for a while. We clearly see globally now that especially for her, different styles are taking off. And we clearly, clearly see that she’s adding these to her locker but we even see it, as I said in the beginning on some of the male styles and especially with what we have done with our friend in the Latino markets. The next thing which is important for us and, of course, value-wise, it’s going to be very, very, very big for us is lifestyle running. Lifestyle running either come from you activating all shoes again or coming with technologies that you kind of tweak. What has happened now is that shoes the moment to go in the performance side that’s gone lifestyle.

And you know we’ve done a lot on the adidas range. We have this EVO 1 and EVO 2 which is the lightest and probably the best running shoe in the world winning marathons. We put that together with SL in the opening of Olympic ceremony. We have done takedowns like the Pro 4 which is also winning marathons. And then we ended with training shoe that you see here, the Evo SL at €150 selling price. That’s certainly because of the design, the comfort and I’m sure also because of the activations that went also lifestyle. And it’s currently our best-selling shoe in many, many markets, in many, many retail, what do I say, channels. And we will extend this into more material versus a lot of colors and it’s a shoe that you will see very, very visible.

But that’s only one, the line-up on lifestyle running is huge. Here you see some of them where we combine classic silhouettes like SL72 but also the LA Trainer. We have the own comfort area, where I urge you to look at Adistar. That’s also inspired by [indiscernible] for us a couple of months ago. We have in the Vistech area on the right side, the new Climacool shoe which is a 3D-printed shoe which was meant to kind of be an incubation of a technology but certainly goes volume. So across these 9 models, you will actually see them being quite volume drivers in certain markets. You will not see these as global trends, meaning one shoe goes everywhere. But you will see some of this being very, very commercial in some of the markets and other styles being in other markets.

And I think this is so crucial that you also understand that the localization of the offer because extremely important these days. When we then go to the classics again, we talked about the Superstar as the next movement out of tariffs. Then we did tell you that it was not necessarily for us to launch it given that the classic shoes that were already in the market were doing so well. So we have phased the launch of the Superstar from different markets to different timings. And you will continue to see a lot of activations with our partners like Pharrell. And you will see activations like going back to when I was young in the 70s to roller skates. And this is just one example of what you will see with Superstar. And don’t forget that Superstar in White/Black and Black/White are the big issues that we ever had.

So you will, over the next 2 years, see that the Street will be clearly have the Superstar being extremely visible. Apparel, we have told you for a while that apparel was doing extreme well with the pure players in the digital world but not so visible in brick-and-mortar. That has started to change. And I think it’s fair to say that track tops, bottoms in all kinds of materials and shapes, we are now very hot. And you see it now in the streets in almost all the markets. And the demand for apparel right now is also much, much bigger from our retail partners than it was only 3 to 6 months ago. Important is also that it’s not only in the higher end of the market but also on a wider scale. And we clearly see that this casual look, combined with the retro look and especially with Three Stripes is high in demand.

For the lifestyle side, always important to remember, we are a sports brand. And the strategy we started out with 2 years ago was, of course, to try to create heat. I think we’ve done that successfully. I agree that some of it is luck, some of it is timing but it’s also hard effort. And then to take the heat that we now have created both in footwear and in apparel and the commercial visibility to then drive performance. I think you will all agree it’s easier for a consumer to buy our running or training shoe if she is already positive to our brand from the lifestyle side than it is opposite. And that’s, of course, what we are now trying to do and where we see we’re making great progress in all markets with almost all retail partners. And I can promise you that we are and will invest more money into sports and more resources into sports because we are, of course, aware of that, that is our future and that we need to have the background in performance to continue to be strong both in the lifestyle area, the comfort area and in the more commercial area.

The 4 sports or the 4 categories that we need to be visible and successfully globally are, for me, football. I think we are the leader and we are very, very optimistic what’s happening next year. We are making huge progress in running, both on the performance side, especially when it gets to running fast and winning and running from A to B as fast as you can but also in the everyday running and in the comfort area, we’re making progress. And as I already said to you, to trigger that into the lifestyle area is for us very, very important because that’s something that has been missing for some years. Training, I mean, everybody around the world that is doing sports need to train. We have to be aware of that the training market is not necessarily global, meaning that you need to approach it both marketing-wise and to a certain degree, product-wise more local.

That’s what we’re now doing. And then basketball will continue to be important, especially for the U.S. market but also in many other markets because the culture coming out of basketball is actually global. And then in addition, we talked about it for a while. We think we need to be visible across many, many sports both global and locally. And as you know, there are many, many sports that are extremely important in certain markets, although they don’t have the global appeal that some people are talking about. What is also a little bit cool, in my opinion, is that this image of not having a lot of, what should I say, innovation which adidas had, was in my opinion, wrong. We have a lot of resources focusing on innovation. It’s therefore a little bit cool to actually be named a fast company when it gets to innovation.

And when you see the innovation that we are bringing in running which probably is the most technical category, proud to see that the Pro 2 now also won the men’s marathon in London. Although the female winner which also set the world record was actually running that Pro 1. So we have 2 shoes out there which are setting the best times in the world. The women’s workup in England will be a launch for us on women-specific rugby teams. Same thing there, a lot of energy and innovation going in to serve the best. And going to the Europe in Switzerland, same thing, very specific product made for her, both from a fit but also from a plate point of view to avoid injuries and increase performance. So again, very, very focused innovation on the athlete that is going to perform in Three Stripes.

We talked a lot about football. The World Cup in the U.S., Canada, Mexico next summer. We already did our launch. We were in L.A. a month ago with about 500 guests showcasing all our products both for the performance and from the culture side, the — what should I say, the adidas family with Messi and the [indiscernible] and other people were there to kind of celebrate it. And I think it’s fair to say it’s probably the best launch that I have been to ever when it gets to a collection and a concept for the event. And needless to say, although we now have the tariff issues, we’re really looking forward to showcase our brand in the U.S. next year because we think we should be the clear leader in that tournament. What is also cool and new is the way football culture has now spread around the globe.

Although many people are not necessarily soccer fans, the soccer culture, meaning old and new soccer strips product coming out of the soccer, what should I say, area are now going fashion. I have never seen this before both for male and female. And of course, this plays straight into our hands when you see what is going on in the market. And of course, we think that will even strengthen towards the World Cup in U.S., Mexico and Canada. Going forward, how do we then think we can use all this? To continue to grow double digits, as you know, is our target. Well, we need to be a global brand with a local mindset. And I say local again and again and again. The world is developing in a way that you need to be successful locally. And locally, it always starts with the consumer and the athlete.

We need to give her what she wants and what we can give her within our frame. The markets are responsible for the offering and the marketing that we’re doing in the market. And a market for me is a cluster that can own the inventory and can actually find the synergies in the best possible way. And then headquarter, the global side is, of course, to set the strategy, to give it the frame, to fund the projects, to come out with innovation and of course, make sure that adidas has a future that is going to be in line with what we have promised. To do all this, it is very important that we need the best people in the markets in China and in India and in the U.S. We need the most talented people that can take all the tools that we give them and actually use them so we’re winning in the market.

Local strategy does not work if you don’t have the best team and if you don’t give them the freedom to move and that is what we are currently doing. So all of this, you remember, a couple of months ago, we gave you the guidance for this year. We said that if you exclude YEEZY, we should have a double-digit growth. If you include YEEZY, it will be high single digit. And with everything we knew, we thought we would then promise you an operating profit or EBIT between €1.7 billion and €1.8 billion. We did, though, tell you that there was some uncertainties around the world that you should be aware of and that could have an impact on the full year. And surprise, surprise, that came. And as you can see on this a little bit messy screen, it shows you in green what the current increases are in the duties compared to when we talked to you the last time.

You also know that on top, you have the duties or the tariffs that were initially initiated by the U.S. and then suspended for 90 days. So currently, on the import, we have the green duties on top of what we had when we set our guidance and when we actually did our planning. But of course, there is a danger that we will go back again to the top of the screen to the higher duties when the 90 days are over and we don’t really know. So what have we done? We have, of course, custom care as much as we could before the 2 dates and the different duties were activated. We have, of course and we are still, analyzing all kinds of the different scenarios. We have rerouted products out of China that was meant to the U.S. market than to other markets. And we have, of course, done different pricing reviews.

I have seen that certain presses writing that adidas is raising prices. That is, of course, not true. What we said is that should the duties stay, then of course, there will be price increases in the U.S. market. And then we will not be the first one to move on prices but we would follow what the market leaders are doing. So should the duties go away, again, there will, of course, not be price increases. But I think we all agree that should this duty stay or even be higher, then, of course, it will cause a price increase in the market in general, not only in our category. What we also did was that we got all the major suppliers together here in Herzo. We had about 300 guests here for 3 days which we do every year, to be honest. But of course, this was also then a topic, how can we in the chain between the suppliers of the brand and the retailers work in a balanced way so that we all can get through this uncertainty the best possible way.

That is, in our opinion, almost always the best way. So back again to the guidance. We do actually confirm the guidance the way we initially gave it but you need to consider the following that better-than-expected Q1, strong order book and as I hope you also confirm, the strong attitude towards our brand globally would, in a normal world without the tariffs, have caused us to raise our guidance, both topline and bottom line. But given the direct impact of the current tariffs that we see and the danger of these tariffs going even higher after the 90 days period plus the possible negative impact on the consumer in the U.S., we warned that there might be some negative pressure on this because we don’t really know. But again, we confirm under the things that we know, we believe that we can currently gain more momentum in the other markets.

And remember, U.S. is only about 20% of our business. So we can kind of finance the losses that we’re doing on margin in the U.S. by then overachieving in the other markets. That is the current outlook that we give you. And then whatever happens, we do believe that we have the brand, we have the talented people and we have the resources to manage through uncertainty. We are focusing very, very much on achieving the best success that we can in the other markets. And again, for 80% of our business, these tariffs have no impact. And then the whole service organization is, of course, focusing on helping the U.S. so they can make the right decision. I think with that, we think — as always, that in sports, we should be a winning team and feel that at least we are on the right way.

And with that, I hand over to you, Seb, for the next step.

Sebastian Steffen: Yes. Thanks very much, Bjørn. Thanks very much, Harm. Maura, we’re now ready to take questions.

Operator: [Operator Instructions] The first question comes from Ed Aubin from Morgan Stanley.

Q&A Session

Edouard Aubin: So 2 questions. First of all, Bjørn, some of your peers in the apparel and footwear world have been talking about some consumer weakness over the past few weeks back, particularly in the U.S. Have you seen any weakening of demand at the sector level, number one? Number two, on the 10% tariff increase that you just talked about, just to understand, if you wanted to fully pass on this 10% price increase, everything else being equal, what type of prices — price increase would you need to take? And assuming that tariffs would stay at about 10% for the remainder of the year and forgetting the indirect tariff — impact of tariffs, would you be in a position to meet your €1.7 billion, €1.8 billion operating profit guidance?

Bjørn Gulden: To answer your last question, I think you had 3 there, if I’m really honest with you. But yes, we think that we can achieve our guidance with those duties for the rest of the year. That’s what we are currently working under that assumption. On your first question, when it gets to the demand, we have not seen any, what should I say, direct change in demand for our product in the channels that we are. You know at the beginning of the year, there was some, what should I say, weaker demand due to different things. But we cannot say that we, over the last 8 weeks, have seen any lack of demand because of this. And then the third question, yes, the price increase is — you have to remember the 2 things here. I mean one is what price increases do you need to actually pay the duties?

And you can do the math on that. But then the question is, what is then needed to actually keep your margin both for us and the retailers? So of course, the real increases are higher than the duty. But again, I don’t want to give you any numbers because you can do the math yourself because there are many ways of putting the assumptions in here. We feel that we have the tools to get through this the best way. You probably know we have reduced China export to the U.S. at a minimum. Although China is a country of origin, when it gets to production, it’s actually up for the rest of the world and of course, for their local business. And then when you look at the other countries, the duty increases that are there are currently at 10%. So it’s the same.

So there’s no reason to change any strategy. But should the duties for the different markets, Indonesia, Vietnam or whatever, be then difficult — different, then of course, we will then start to allocate product in a different way. But currently, we keep the plan, China for the U.S. to a minimum. We keep the production where it is from the other markets. We have not initiated any price increases but are, of course, observing what the markets are doing and then we will inform you as we go.

Operator: The next question comes from Piral Dadhania from RBC.

Piral Dadhania: So my first question is just in relation to the formation of the wholesale order book for the autumn/winter ’25 product which I imagine you’re currently taking orders for. Could you just give us a flavor as to the kind of discussions you’re having with your retail customers in relation to forward-looking orders? Is there any change in their sentiment or their approach towards placing large orders in anticipation of potential changes to the tariff regime in the U.S., for example? And then my second question just is a clarification, Bjørn. In your prepared remarks, you talked about the 10% EBIT margin target as being a midterm target. If I’m not mistaken, I thought previously, we were sort of trying to work towards that 10% by 2026. Is there any — just to clarify, is there any change in terms of the time frames that you’re working towards, notwithstanding, of course, any potential headwinds from U.S. trade policy?

Bjørn Gulden: No. There is no change in the 10%, ’26. ’26 is, for us, midterm. So I think that’s in — depending on when you were sitting when we talked in ’23, 2026 was midterm. So it’s just a way of talking about it. When you look at the order book for the second half, globally, there is no change in the order book, meaning that there’s no cancellations. Every retailer outside the U.S. has no reason why they should change anything and there is no change in the direction of the order book. The U.S. order book is full for Q3. It’s still going on for Q4. And it’s the same thing there, there is no changes in the behavior other than people are uncertain, meaning we order and then we see, right? But we have no cancellations. So currently, it’s business as usual, expecting then a confirmation of what’s going on.

And again, regardless what the retailers are nervous about, they will need good selling product, right? And we think we are in this unique situation that we have also in the U.S. now a good momentum, meaning that they will need our product to sell. And then together with both the suppliers and the retailer, we then have to agree upon what are the prices and what are possible discounts if duties should then change or be confirmed. I hope you have the understanding that to give straight answers is very difficult for you don’t know what duty are tomorrow. I mean you can imagine that there are so many scenarios. So we feel very calm. We focus on the 80% that is doing well. We focus on delivering the product to the U.S. that we think we can sell.

We talk to the trade, we observe any price changes. And as soon as we see something, we act and we will act on it. I think that’s the only way you can act today. And of course, we talk about this every day and feel that we have a very good, what should I say, communication internally on different activities. But it is uncertain which — it is the way it is.

Operator: The next question is from Erwan Rambourg from HSBC.

Erwan Rambourg: Well done on a very strong beginning of the year. Two boring questions, pardon me. First of all, could you give a bit of details in terms of the split of regional production going into the U.S.? I think you said China was minimal but can you quantify that and maybe give out the 2, 3 countries of origin that count? I imagine Vietnam and 1 or 2 others in Asia. And then secondly, can you give us the percentage of dollar hedging that you have? What level is that in ’25 and ’26? What percent of invoicing is hedged and at what level, please?

Bjørn Gulden: For the North American market on footwear, I think I’ve told you before that North America is having China sourcing around 3%, going, of course, now towards 0, that the balance between Vietnam and Indonesia is very much the same. It’s about 1/3. And then the rest is spread in — around the many, many markets. So I would say, Vietnam, 1/3; I would say, Indonesia, 1/3; and the rest spread among the other markets. I think that’s the split on footwear. And then on apparel, it is actually no dominant markets. I think Vietnam is around 15% and the rest of the markets are around 10% and it’s spread between countries like Pakistan, Egypt, Indonesia, even Europe. So it is very, very different and very balanced. And the China sourcing for apparel is less than 2%.

So, I think — again, I need to be careful because I don’t have the insights on the other brands but I think we have taken care of whatever you can do on sourcing as much as you can and reduce China for the U.S. to, as I said, almost nothing. Some specialty issues are still there but I mean, we will work on that. And then the rest of the portfolio is very balanced. And I don’t think that there would be something now that will make us have to change a lot on that, to be honest. But again, who knows. So for the currency, I look at Harm and he will give you that.

Harm Ohlmeyer: Yes. Of course, a good question. I’d say volatility of the dollar as well. So a short answer to this one, when it comes to spring/summer ’25, of course, we are done with our hedges. And you should be aware that, of course, some of the hedges that we closed, you always know that we normally hedge to the beginning of the production season up to 80%. And then we did close the remaining hedges during a time where the dollar was feel stronger. So you will see some headwind in Q2 when it comes to this that I expect. And we have some more volume that we sourced as well given our growth trajectory. We are still having some open hedges for Fall/Winter ’25, where we take the benefits of a weak dollar right now. So that should offset each other pretty much for the year.

So that’s how we look at ’25. So definitely some headwinds in Q2, some tailwind in the second half. That’s largely how we are looking at that. When it comes to ’26, of course, there’s more open opportunity that the dollar would stay where it is right now. We took advantage of some forwards already. So that should be a tailwind all along as the dollar stays where it is. And then, again, we always said we are praying for a weak dollar for the future. That will definitely help us in ’26 and also in ’27. What we should not forget, however, there’s always translation impact as well. And it’s good to have a weak dollar in general for us. But it’s also, from a translation impact, when you have a strong euro against all the other currencies, you also have some translation impact, right?

And normally, these things come in sync. But sometimes you have 1 quarter where you have a double whammy in one direction and then a double whammy in the other direction. So — but overall, don’t expect too much in ’25 from a weak dollar but definitely opportunities in ’26 and ’27.

Operator: The next question comes from Jürgen Kolb from Kepler Cheuvreux.

Jürgen Kolb: Indeed, 2 questions, a little bit away from all the tariff questions. First of all, on markets. Emerging markets continue to be extremely strong. And that now over quite some time and also from an absolute level, have reached a quite attractive level. I was wondering if you could maybe talk a little bit about the top 3 markets as to what you’re seeing there, what the drivers are or what makes really this overall market and then specifically the top 3 markets, so attractive for you and what’s the driver behind it? That’s the first one. The second one, Bjørn, you mentioned the 4 categories that you think adidas should be very strong in. And it’s again, number 4 basketball. Still relatively small, if I’m not mistaken.

How have you developed here? How is the current performance specifically in the U.S., obviously? And how is Jerry Lorenzo helping you or not helping you? And what’s the plan to attack this category even more aggressively maybe than in the past?

Bjørn Gulden: Well, first of all, in basketball, you are right. the performance category is not as big as people think but it has a huge impact on your connection to that street culture. And eventually, if you do well in performance, you will sell more of basketball classics, right? So that’s the recipe. We have the luxury currently to having at least 2 players that are doing extremely well. We have Anthony Edwards which currently with the Timberwolves are up against LeBron and the Lakers doing extremely well. And as you probably know, his shoes has done extremely well and we are now launching the number 2 also. And it seems from the reaction that is very positive. And then we have Harden playing at the Clippers. And believe it or not, the Harden 9 is the best-selling Harden shoe that we ever had and that’s also developing very positive.

And if you look at the design of those 2 shoes, it’s a little bit the new language of adidas basketball. And it’s obvious that that is doing something because we’re taking share and we’re getting more distribution. From the same time, we have changed the management. So we have a new manager for basketball that has come in. We have been able, I think, to really get some activities going in the L.A. office which is producing a lot of creativity and that’s why we look very positively into basketball for the future. The way you measure basketball is, of course, very difficult because some brands put the classics into it and we are now splitting between performance and classics, not to confuse. And we see good growth now on the performance side and especially on the signature side which I think we are almost the only one who currently see.

And then you know that the basketball culture from a lifestyle point of view goes into many markets. And especially for us, ironically, it’s been very strong in the China market which right now is a little bit ironic but it’s a fact. So we feel we are on a good way. I can hear in your tone that you don’t believe in adidas basketball as much because we probably talked about it many times. But I do think we have now an American group, we have American creative, American leadership sitting in L.A. And we give them the freedom from Germany. So they should have all the tools to be successful. When it gets to the emerging markets, I think we need to first agree that the emerging market is not one market. It’s a cluster of many markets. And we have put it in the hands of a management team that are a little bit entrepreneurs.

They’re sitting in Dubai and are running markets from the Middle East into markets like Australia and New Zealand and all the way to India. So it’s a very — I would say, it’s a diversified group of markets. But we need to cluster it somewhere Instead of clustering here in the headquarter, we have then Thomas Davis and his team doing it. David, Thomas, Thomas David — doing it. And I think they found this, what should I say, balance between creativity, energy and local freedom within a frame and that’s why it’s working. And to be very honest, it works in all the markets. It’s not like there is 1 or 2 or 3 markets that you asked for. We have a very strong development in the Middle East. We have finally a strong development in India and we have to turn our business in Australia and New Zealand.

So it is a very, I would say, interesting group of markets that are playing a little bit different than what we do in the big, what should I say, classic markets. I think that’s how I should answer it. We could go into each of the individual markets but I don’t think really it matters. Like for example, we talked about India and cricket for many times. Now it’s the same thing happening in Australia, where we’re going into network for her and we’re doing also real football for him. So we’re kind of adopting to the things that we have talked about also in those markets. And needless to say, that’s what you need to do to be a sports brand. And with the power of the Three Stripes and the global assets we have then on the lifestyle side, it’s certainly the recipe then the right management gets attention on.

So that’s the reason for it.

Operator: The next question comes from Warwick Okines from BNP Paribas Exane.

Warwick Okines: The first is back on tariffs, please. If I understand you correctly, you’re saying you don’t plan any price rises at the sort of current level of tariff. But if tariffs do go higher and you feel you have to raise prices, would it make any sense to spread those globally? Or would they all fall in the U.S.? And then the second question is, could you just give us a bit more flavor about the conditions in Latin America? And how much of your growth is being driven by volume?

Bjørn Gulden: Well, there is no reason to raise prices outside the U.S. because of the tariffs. I mean there’s always a discussion about what is the right price level compared to your heat and your selling, so there might markets where you say you can take higher prices but they’re not initiated of the tariffs. So the discussion we’re having on the tariffs is only for the U.S. And again, we have said that we will not raise prices right now but we will see what happens in the market. We do know that there are brands that are more dominant and more dependent on the U.S. market than we are. We also know that there are brands that are more dependent on China sourcing for the U.S. market than we are. So we do expect that people will start to raise prices should these duties or all the duties be confirmed and that’s what we’re following.

And we are then in a reactive mode and not in an active mode. I think that’s the only way of saying it. So again, we do not plan to raise any prices outside the U.S. We do not currently plan to be a price increase leader in the U.S. but are following what’s happened in the market. And I think we both know that should the duty stay at 10% or should they be even higher, then, of course, price increases at the end will be there because there’s no way that people can swallow this through the industry, neither the brands nor the retailers. And again, don’t forget that when you talk about this, it’s not only our sector, right? It’s all sectors. So I think we are doing the right thing, having 20% of our business in a market where we don’t need to lead but we can wait and, what should I say, then react to what we see in the market.

Harm Ohlmeyer: Well, when it comes to Latin America, I know a lot of people ask the question whether the growth is only coming from the value through hyperinflation in Argentina. But I can tell you, first, we are clearly the number 1 brand across all of Latin America, almost in any market in Latin America. And we are growing volume in every market in Latin America as well, including Argentina. Yes, of course, it helps to show the value growth as well from an inflation point of view. But in a hyperinflation environment, consumers are buying — actually or they pull forward their buys given the inflation. So the volume growth is significant, also in Argentina. So everything very solid. And similar to what Bjørn said to emerging markets, we have a very, very solid management team in Latin America. These entrepreneurs, they find solutions in different environments. But very clearly, the number 1 brand in Latin America and volume growth is in every market.

Operator: The next question is from Thierry Cota from Bank of America.

Thierry Cota: Two of them, please. First, we’ve seen very low OpEx inflation ex marketing in Q1. I was wondering whether you think that overhead expenses could be flat or down in your terms for the rest of the year given the non-recurrence of the one-offs in H2, the overall cautiousness of the spend and the appreciation of the euro? And the other question, just for clarification, you reiterated the full year guidance. I was wondering whether in the recalculation that you’ve made, you include any tariff effects, price effect or not. Or you’re just basically comfortable with the full year number target given the strong Q1 that you’ve just reported?

Bjørn Gulden: Well, in our guidance, we have put in the assumptions of the things that we now know. And we think we have the momentum in the rest of the world and to actually accelerate both bottom and topline so we can achieve it should the duties than come in regardless what happen to prices. You can calculate this in 100 different ways but it doesn’t really mean anything. We will fight to reach our guidance as long as we have the chance to react within the frame that we currently see. Should all the duties be 49% and 125%, then of course, we will have to talk but we can’t imagine that that will happen. So I think that’s the only answer I can give you. With everything we need, we still promise you that we will deliver our guidance.

And then hopefully, there are some good news coming around in a short period of time and shouldn’t it, we will have a discussion. But don’t forget that for the rest of the world, this has no impact. So 80% of the business is business as usual. So it is currently a local problem that we need to solve but we don’t have the facts that we can solve it yet. So I think I’ll leave it by that. And on the overhead, Harm, I’ll give it to you.

Harm Ohlmeyer: Yes. And of course, we shouldn’t forget when we talk about the operating overheads, first and foremost, our focus is on leveraging our infrastructure and not necessarily declining the operating overhead. And we shouldn’t forget excluding YEEZY, we have been growing 17% currency-neutral in the first quarter. And again, with that growth, assuming that the operating overhead in absolute terms will be flat or negative is probably a little bit too ambitious. We did a lot of measures in markets and also in headquarter to prevent the cost increases. And that’s what you’re seeing in Q1. But again, the focus is to get the leverage right and do it right also for the organization over time. But you have seen in Q1 that we’re on the right track also to what we believe is our formula for 2026 that we get to an operating overhead ratio around 30%, ideally below 30%.

That’s where we’re right on track with the growth trajectory that we have. But again, the focus is on leverage. And we shouldn’t forget, we just talked about emerging markets in Latin America. If you grow like 20%-plus and you’re an inflation market, you also have inflation on the cost. And that’s where you expect salary increases in these markets as well. So that’s part of the reality. They become bigger. But the discipline is in our new operating model that the central costs are well managed, well under control. And then, of course, we are growing in the markets with some costs as well but leveraging the topline that we have. So again, the focus is on leverage, not on declining the operating overheads.

Thierry Cota: And just maybe as a follow-up, so the 30% that we’ve seen in Q1 effectively, supposedly could be maintained in the coming quarters, do you think that eventually, you’ll be able to be at 30% for the whole year, not this year, naturally but for whole year, including a higher number in Q4?

Harm Ohlmeyer: Well, of course, it’s getting easier, especially when we talk about Q4. But again, our goal is not to get to 30% in ’25. There are a lot of things are still happening with the growth that we have. But again, we are on the path to get on a full year to the 30% number in ’26. That would be the expectation. But right now, in ’25, I’m not going to give you quarterly guidance. But you’re absolutely right, in Q4 with the one times that we had, it should be easier to leverage over that sales growth.

Operator: Next question comes from GJ Lowery from Redburn.

Geoff Lowery: Just one question, please. The discussion around increased localization of your business, can you give us some thoughts about what you mean — what that means for the longer-term financial model? Do you think it means more sales volatility or less, more working capital or less, more marketing budget or less? I’m just intrigued by the sort of deglobalization that you appear to be talking to and I wondered how you thought it joined up with financials?

Bjørn Gulden: Well, to be honest, with you, I think it will actually help profitability at this scale. You have to remember that, for example, the U.S. and China now have two complete different supply chains. I mean you clearly see that U.S. cannot source from China and China should source local for local. So the 2 biggest markets, when you exclude Europe, are independent anyway. And I actually believe that with the scale that we have, let’s say, with €30 billion, then it’s better to have 3 dedicated, what should I say, go-to-market processes with supply chain that are each doing €10 billion than having one that is doing €30 billion because the synergies in the €30 billion are lost in the complexities. So I don’t see any way of, what should I say, growing double digit on a stable base, making sure that we are efficient on marketing and even on working capital, unless you go local.

The worst thing for a brand is to push product into a market that the consumer doesn’t want because then you know the discount is killing both your brand heat and your profitability. So the SKU counts and the standard going-in margin that people calculate and you say you can save €0.10 on a shoe or whatever is irrelevant compared to the discount rate you do on the inventory that is sitting in the wrong market. So I am, since a long time, a big, big, big, what should I say, fan of going local because there’s no way you can sit in a headquarter and understand the difference between Australian, the Indian and the Norwegian market because they’re very different. So our goal is to set up go-to-market processes and link that into factories. So we both from a design and development and sourcing can be more efficient for the consumer where he or she is.

And I think, to be very honest, we have showcased it already. I mean the gross margin improvement that we had over the last 24 months and the success is partly because we have changed this already with the right attitude. So again, I see — it’s the opposite. If you want to have one big machine doing it all and you make the assumption that the world is global and the consumer wants the same and you put it through the same machine, I don’t think you will be able to stabilize neither your growth, your margin nor your working capital. So I don’t see any other, what should I say, way. If you look at our exposure China to the U.S. and we say it’s 3%, that is — that would not be possible if we don’t think local. So I think when you analyze all the brand, then you need to look upon what is their sourcing setup for the so-called local markets and maybe they need to also rethink because I don’t see any option, to be honest.

Operator: Next question comes from Aneesha Sherman from Bernstein.

Aneesha Sherman: Bjørn, you talked about adidas’ demand strength in the U.S. Given that strong demand position and the strong sell-throughs you’re seeing, do you think you have better pricing power in the U.S. compared to your competitors and could take up prices without hurting demand as much in the market? And then related to that, you talked about a few different mitigation strategies for the tariff costs. You talked about consumer pricing, potentially renegotiating with suppliers. There’s also the option to renegotiate with retailers and you talked about rerouting product. How do you think about the timing and the prioritization of these? So if we hear the final tariff rates announced by the U.S. administration in early July, how quickly will you be able to execute these different moves? And should we expect some near-term headwinds in H2 before you’re able to roll out all these changes to be effective in 2026?

Bjørn Gulden: Well, I think the pricing power you have is always depending on what’s happening in the market. And as I said, I think our strategy will not to go as the first mover on price but we’ll actually look at the other brands, especially the American brands and then follow. I don’t think we — being, I would say, a smaller player in the market compared to at least one brand should lead this. And I don’t think it would be in our interest. And let’s face it, on a global scale, we don’t need to. Are there certain products that we can take up in price isolated? Yes. But I think we need to look at this in the totality and also make sure that we are a friend of the retailers and that we don’t take up prices now on their best sellers so that we look good and let the burden on them.

So it’s a matter of managing this imbalance. And that leads into your second question. We had all the suppliers here. We have, of course, talked to all the retailers. And this is for me a little bit the same as we had in COVID is that we are moving into big uncertainties where everybody is nervous and you cannot try just to take the advantage yourself. You have to think about both your retailers and your retail partners. So yes, our goal is with the retail partners to find a way, of course, to be more efficient for the American orders then should this duty stay but at the same time that we commit to the quantities for orders and forecasts that we’ve given so they don’t need to lay off people and don’t run into problems. And at the same time, we have to not forget that the retailer, should we get increase in tariffs, we cannot only put the tariffs on the wholesale price but then we also need to increase the retail price so that they can do the margin on this, right?

So I think this is really a situation where the balance in the chain between supplier, brand and retailer needs to go hand in hand and that’s what we will try to do. And that’s also the discussions that we’re currently having. So, I don’t think I can answer it to others. How quickly can you do those things? Well, you can change prices tomorrow, right? That’s not the problem. But again, you have to do it then in a way that the chain is then in balance. Sourcing changes, I don’t really see necessity of because, as I said, we are so small in China that should the high, high, high duties in China stay, it won’t have a huge impact on us and any changes. And I do assume that the deals that are being made with the big export countries will be similar.

And should they be similar, then it doesn’t change any allocations when you get to what country origins we’re using. And I think we told you already that in apparel, we’re very balanced between the markets. In footwear, we are, of course, for the U.S. market more dependent on Vietnam and Indonesia. But again, we feel that given that we cannot produce anything in the U.S. that is any meaningful in volumes, we will try to keep the balance with our suppliers the way we already have and then move as soon as we see what the market is giving and be very agile and fast when it gets to things that we do with speed. We did accelerate very quickly all we could when we heard about this to get custom clearance before the fourth and the ninth. So I think we’ve shown speed already.

So I don’t think I can say anything else, to be honest.

Operator: The next question comes from Robert Krankowski from UBS.

Robert Krankowski: So first one, I just wanted to clarify because we mentioned the U.S., no change in demand. But, Bjørn, could you talk about the beginning of the Q2? Have you sustained double-digit momentum? And is it both including/excluding YEEZY? And then, the second question is more about the other regions. I think we focused a lot about the U.S. but I just wanted to touch on other regions. Like 4 of your 6 regions have already delivered or exceeded 50% gross margin. And I understand there’s a lot of seasonality in your business. But looking ahead for the remainder of the year, do you see a reason why Greater China and Europe could not reach the — or even exceed the 50% to 52% or upper end — exceed the upper end of 50% to 52%, while emerging markets in Japan/South Korea sustain these high gross margin levels?

Bjørn Gulden: Well, you know it’s always easier in Q1 to have a high margin because that’s where you have most of the launches and to keep the margin through the whole year at the same level has always been difficult. And I think we also need to be very, very, what should I say, conscious that we need to make sure that we work together with the retailers to keep, I would say, our supply clean and help them should there be inventory that is not moving. So I think we need to be careful of promising exceeding margin through the year, to be honest. You also know that the margin is also a result of the mix between wholesale and D2C. And as I said, we are currently supplying the wholesaler almost with priority compared to D2C to be service-minded.

We had to do that, in our opinion, to get better distribution. We have quite some new categories hitting the floor running. Lifestyle is one of them. We have more performance products on the way than we had before. So I don’t want to promise you that. Is there a possibility over long term to have a higher margin in these markets? Of course, there are and there is an upside to it. But I think it would be wrong now to model that for the rest of the year. We think, to be honest, with the uncertainty in the Q1 that we have shown and the fact that we’re confirming the guidance is a statement that we believe in the future and want to be very careful of overpromising you anything now in the rest of the year with the danger of then, what should I say, disappointing you which we don’t like.

I think that’s the only thing I can say.

Robert Krankowski: And on the second…

Bjørn Gulden: The current trading — yes, again, we haven’t seen any slowdown that you could connect to this, to be honest with you. I see reports and I read reports and I hear but we can’t see it. As you know, there was volatile demand in the market beginning of the year and there’s been many explanations for that. But we haven’t seen any impact now of the tariff discussions on the sale, neither in performance or the value chain nor the lifestyle side because of this. We cannot confirm that. But we read about it but we cannot confirm it.

Operator: Next question is from Adam Cochrane from Deutsche Bank.

Adam Cochrane: One quick question for me. In terms of the performance that you’ve seen in the marathon and the happiness that you’ve got with the product line-up, is now the time that you think you can really double down and win in the running category?

Bjørn Gulden: Yes. This is a little bit difficult to answer in the sense that 2 years ago, if we had the shoes that we have today, I’m not sure it would have worked because I don’t think the trade was ready to take adidas up as a running brand. But I think given the success we’ve had and the many, many consumers now have a positive feeling to adidas, the interest from the trade is much, much bigger. And that, combined with that we’re winning a lot of marathons and rewards when it gets to the product, of course, it is the time to double down on running, definitely. So you are spot on when it gets to — that this is very, very much a priority for us the next 18 months, not only in the racing, what should I say, community but also in the everyday running and the comfort running segment that we have seen so many other brands be so successful in.

So you’re absolutely right. And the irony then is that that also leads into the lifestyle area which you know that many running brands today that were meant for comfort has actually ended up being lifestyle shoes. So we think that a little bit luck again, that the timing of creating heat in lifestyle then having certainly a very good running range, even stretching into new models that you will see in the comfort range that will come in ’26, we think that it is a great, what should I say, chronological sets of events that would help us. So yes, running, priority. And yes, we are doubling down on running in the next 18 months.

Adam Cochrane: As I’ve got you, one more springs to mind for Harm maybe. Do you think given the scale of the euro-dollar movement that will enable you — given the lower cost of goods sold across the rest of the world, if you were to hold prices in the rest of the world, would that subsidize anything that you need to do in the U.S.? And is that something that you would consider as a lever?

Harm Ohlmeyer: Well, the starting point is always, whatever we do in the rest of the world, we want to run a profitable business in the U.S., right? So you might have in the short term that you can compensate some of the dollar weaknesses through the short-term tariffs that you might have in the U.S. I get that question and there’s a good answer to this one. But again, in the midterm, we want to run a profitable business in the U.S. And Bjørn alluded to, if the tariffs would stay or they move away, it’s a different story. But if they would stay, we want to be fair to all of our partners, whether it’s the suppliers, the retailers and how we share that countermeasures. But it’s not our objective in the midterm to raise prices in other markets or using a currency that might be just of short nature because it might flip again very quickly.

So that’s not our strategy. It can help us probably in the short term to technically mitigate. But in the midterm, again, we want to run a profitable business in the U.S. regardless. And then we continue to run profitable business in the rest of the world. So in the midterm, it doesn’t help.

Sebastian Steffen: Thanks, Adam. Maura, we have time for 2 more questions, please.

Operator: The next question is from Monique Pollard from Citi.

Monique Pollard: So 2 from me just focused on the U.S. One’s a quick clarification question. I’m a bit confused by the North America YEEZY sales that are implied in the 1Q ’25 data because it seems different to the North America YEEZY sales that were implied in 1Q last year. From the 1Q data last year, it looked like North America was under 50% of YEEZY sales but this data suggests North America is sort of over 60% of YEEZY sales. I didn’t know if there’s been a change in reporting of those YEEZY sales. And then the second question I had was just on North America. So ex any potential impact from tariffs and second-order implications on the consumer demand, I guess I’m thinking about lifestyle and performance in North America.

You’ve got the AE2 launching with AE1 having been such a big success in basketball and then the Superstar, I guess, starting to scale. So do you think the North American momentum ex anything from tariffs could actually accelerate as we go through the rest of the year?

Bjørn Gulden: Well, again, to the U.S. market, we, of course, need to invest more in American sports. So when you look at our investment into American football, baseball and basketball, it is increasing because we know that to sell to the kid also training another gear on the performance side, we need to be more American. So that’s going on. And it is a huge target for us to get better distribution with the academies and the DICK’S or the Scheels of this world. And we feel that we now have the right products. But of course, we need to do this over a longer time. So there is a clear target to increase our performance side in the U.S. for that kid. But as I said, that will take a long time. When it gets to the lifestyle side, we have a momentum, especially with her.

And we know that we need to get more growth with him. That’s why a lot of the investments now are also towards him. But in total, we feel that we have all the elements that will give us a double-digit growth in the U.S. and you saw that in the last 2 quarters. And again, we don’t see why that should change because of the tariffs because as I said, the trade and the consumers continue to buy something and why shouldn’t they buy us if we have momentum. That is the, what should I say, the philosophy. When it gets to YEEZY, I’m not sure I understand your question. But we sold in the full, what should I say, first quarter last year, €150 million of YEEZY which is then missing this year. So when you’re measuring the sales, you take adidas against adidas, then it’s 70% up.

If you take adidas sales now which is the only one we have because there’s no YEEZY to sell, then you take them through the combined YEEZY and adidas sales, last year, we only have 13%. So I’m not sure what sales are missing. Most of that is, as you can see, in the U.S. and most of it was in digital. That’s why you see that those 2 numbers are different. But there’s no change in reporting. And if you really need the details, I’m sure that Sebastian can give it to you later but there’s no change in those numbers.

Sebastian Steffen: Thanks, Monique. We’ll follow up later.

Operator: Last question for today is from Jonathan Komp from Baird.

Jonathan Komp: Certainly helpful today. I understand that you’re embedding a lot of new uncertainties while maintaining guidance for the year. If I could just ask to try to understand the seasonality of your margin performance that you’re expecting for 2025. First quarter, a 9.9% operating margin. Typically, the first quarter is near, or even above in most years, the full year operating margin that you deliver. So I’m just trying to understand, as we think about the balance of 2025, why that may look different based on the assumptions embedded in your guidance?

Bjørn Gulden: Well, you’re right. I mean the first quarter is normally our best quarter. If I should, in my whole life, say, the historical and strong Q1, weaker Q2, strong Q3 and weaker Q4. That’s kind of the way the operating margin comes through a year. That’s why we didn’t guide 10% for the full year in 2025. And I think you will see the same seasonality now that — Q1 very strong, next quarter will be everything being the same, weaker than Q1 from an operating margin. There might be some negative effect on top of it because of duties, depending on what’s happening with the merchandise that’s arriving, what happens but it should be that huge. Then Q3 should be very strong, depending on — or given the order book we have and the size of the business.

And then Q4 is always depending on what is in the market when it gets to discounts, what are the take-backs that you have in markets like China. So it’s a more volatile, what should I say, quarter. But your assumption is right. I think right now on top of this, you have the uncertainty what could happen to the duties which no one knows, right? So we feel when we tell you that we keep the guidance that we’re pretty, I would say, tough. I think most people will backpedal on their guidance. We don’t because we believe in the momentum and we see the strength also outside the U.S. But again, as you can imagine, there are many uncertainties that is created or this duty thing because you don’t really know what the cost of your product is tomorrow which is very, very unique.

Jonathan Komp: Yes, that’s very helpful. And then just one follow-up. On the footwear business, the 3 main growth drivers that you’re working to scale up, low profile, lifestyle running and Superstar. Bjørn, could you maybe just give a little more context and road map in terms of how you see those models starting to contribute over the next few quarters and over the next couple of years? A little more detail there would be helpful.

Bjørn Gulden: Well, I think low profile is a trend that will last for 2 to 3 seasons and go away again. Running lifestyle is a trend that has been there always but we, for whatever reason, lost it for a while. I think when you see the effort, that should be the biggest category next to the classics that we have already success with. And again, it should be very, very specifically a segment that we continue to invest in so we don’t lose it again like we did some years ago when we lost the success of Boost and NMD. So I think we are more conscious now on bringing innovation and bringing more models to the market so that we can have winners all the time and not have the volatility. And then Superstar is, of course, the biggest shoe that we’ve ever had.

It does compete with the Campuses and to a certain degree, even other shoes that you already have success with. But important for us is that when you go to a Foot Locker is that we have a good offer on the classic courtside which is currently the Terrace and the Campus, then you add a low profile to it, then you add Superstar to it and then you can start to manage out of some of the volumes that you have in Terrace that we on the running wall have both classic shoes like the LA Trainer or the SL72 that in the comfort area, bringing in new like we do with the UFL. And then on the Vistech more aggressive side, we have Climacool, both the OG shoe and we have the 3D-printed one. And then in the Vistech side, we also have the Megaride which we will start to see that we put even soccer up around it because it’s a trend that we see, especially with the male consumer in the U.S. And then we will come up with silhouettes that you haven’t seen before.

There is quite some, what should I say, creative work happening that uses running technologies on new offers that the market hasn’t seen. And then basketball, we think that given that another brand has such a market share that we should grab some of that. And we think if we use the resources that we have better, we can, not only with Antony Edwards and Harden but also with other, what should I say, franchises be more successful and grab share that we’ll not only sell more basketball shoes but actually create heat also for that consumer in other areas, including apparel. So I think there is a clear strategy how to do this and then it’s up to us then to deliver it.

Sebastian Steffen: Thanks very much, Jon. Thanks very much, Maura [ph]. Thanks very much, Bjørn and Harm and thanks very much to all of you for participating in our call today. This concludes our Q1 2025 results conference call. As always, if you have more questions, please feel free to reach out to Adrian, Philip myself or any other member of the IR team. We’re very much looking forward to meeting with you over the next couple of weeks, be it during our road shows, be it at one of the conferences during conference season or be it here at our beautiful campus in Herzo. We’ve talked a lot about the product during our call and I can only reiterate what I said in the past, Herzo may not be the center of the universe but I can definitely tell you it’s worth visiting.

We have more than 30,000 product of our spring/summer 2026 season here on display. And we’ve talked a lot about the newness that we see in lifestyle running. We’ve talked a lot about the breadth that we see on the classic side in lifestyle. And not starting to talk about apparel, Bjørn has talked about the World Cup tent that we’ve built here. So if you happen to be in Europe, if you want to make the sidestep to Herzo, you’re all invited. We will actually have several broker-hosted visits during the month of May and June. And if you want to be part of that or visit individually, please feel free to reach out and we’re happy to host you and show you around. And with that, enjoy the remainder of this beautiful sunny day, enjoy some of the Champions League action tonight and speak soon.

All the best. Bye-bye.