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Adidas (A3, A-; double neg) {ADS GY Equity} - comp's report weak US retail conditions

CONSUMER CYCLICALS
  • As a recap on recent developments; Yeezy inventory disposal (drops) has been more successful than expected last year - a positive for margins/ratings - but it still needs margin growth & earnings growth for leverage to come into required levels (Moody's 2.5*) - it reported it fell from 4.8* to 3.3* over the qtr ending in FY23 helped by earnings uplift and no refi'ing on a €500m paydown.
  • It kept FY24 outlook unchanged (from earlier this year) at high-single digit constant currency growth (ex. Yeezy) and 2024 EBIT at €500 on assumption Yeezy inventories will be sold only at cost. Capex targets left unch at €600m while dividend was kept unch (tad higher than consensus) at €126m.

Adidas curve continues to screen tight to us, we don't see any rating upside in near future with Moody's out in late Jan affirming negative outlook. Cash lines unch today.

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