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Adidas (A3, A-; double neg) {ADIDAS HB Equity} 1Q Results

CONSUMER CYCLICALS
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As always not much to see in Adidas secondary given curve trades perennially tight (CSPP'd). Moody's wanted EBIT margin ~5% or at €1b this year with its adj. leverage at 2.5x to stabilise ratings - we see both achievable on consensus but co has kept guidance conservative/shy of that for now. It has a €500m line rolling off in September - a new issue might make its secondary more interesting for a change.

  • Co already pre-released prelim results 2 weeks ago that were a strong beat with +8% organic revenue growth & a +6.4% boost to gross margin.
  • Growth driven by Direct-to-Consumer (+20% vs. wholesale +2%) with its store sales +11% & e-commerce +34% (adj. for Yeezy).
  • By geography double digit growth in most outside China (+8%) & Japan (+7%). Only fall was in NA down -4% on drag from wholesale on mgmt conservative on sell-in on elevated inventory levels.
  • Operating profit at €336m with FY guidance now at €700m (from €500m) - looks conservative given 1Q performance - consensus is just shy of €1b at a margin of 4.5% (this qtr 6.2%). Co is guiding to fx headwinds.
  • Net debt down €1.7b to €5b, liquidity ample at €1.1b.
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As always not much to see in Adidas secondary given curve trades perennially tight (CSPP'd). Moody's wanted EBIT margin ~5% or at €1b this year with its adj. leverage at 2.5x to stabilise ratings - we see both achievable on consensus but co has kept guidance conservative/shy of that for now. It has a €500m line rolling off in September - a new issue might make its secondary more interesting for a change.

  • Co already pre-released prelim results 2 weeks ago that were a strong beat with +8% organic revenue growth & a +6.4% boost to gross margin.
  • Growth driven by Direct-to-Consumer (+20% vs. wholesale +2%) with its store sales +11% & e-commerce +34% (adj. for Yeezy).
  • By geography double digit growth in most outside China (+8%) & Japan (+7%). Only fall was in NA down -4% on drag from wholesale on mgmt conservative on sell-in on elevated inventory levels.
  • Operating profit at €336m with FY guidance now at €700m (from €500m) - looks conservative given 1Q performance - consensus is just shy of €1b at a margin of 4.5% (this qtr 6.2%). Co is guiding to fx headwinds.
  • Net debt down €1.7b to €5b, liquidity ample at €1.1b.