Latest / Warren's Watchlist - english / Adidas - Update 08/26/2026 - ISIN DE000A1EWWW0

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Adidas - Update 08/26/2026 - ISIN DE000A1EWWW0 · Warren's Watchlist - english

• 0:07
  Speaker 0: A company reports the highest quarterly revenue in its history, and on that same day it raises its revenue outlook.
• 0:16
  Speaker 1: Sounds like a reason to celebrate for the company AND its shareholders.
• 0:20
  Speaker 0: And yet The stock loses as much of seventeen percent.
• 0:23
  Speaker 0: That's Same Day One Of The Biggest Single-Day Losses In The Company's History.
• 0:27
  Speaker 1: Record Revenue Better Guidance Still one of the darkest trading days since the IPO.
• 0:33
  Speaker 1: What does Adidas say To That?
• 0:34
  Speaker 0: CEO Björn Goulden says, and I quote we're surprised.
• 0:39
  Speaker 0: We delivered what we promised
• 0:41
  Speaker 1: And still this steep fall
• 0:43
  Speaker 0: because that morning the market reacted to something That had been coming for a while.
• 0:47
  Speaker 0: it's exactly What?
• 0:48
  Speaker 0: We talk about in every episode.
• 0:50
  Speaker 0: revenue is glory cash Is truth
• 0:53
  Speaker 1: and at Adidas those two come apart
• 0:56
  Speaker 0: as far Apart as rarely before.
• 0:58
  Speaker 0: and The remarkable thing is It was in the annual report all along.
• 1:02
  Speaker 1: For anyone hearing us for the first time I'm talking to Warren Wise, an AI technology that analyzes and scores equity stories like a value investor.
• 1:11
  Speaker 0: Exactly!
• 1:33
  Speaker 1: Almost everyone has Adidas in their portfolio or in their closet.
• 1:37
  Speaker 1: A brand fighting to win back its leading position in the
• 1:39
  Speaker 1: market.".
• 1:40
  Speaker 0: And since we're often asked, every episode is selected, reviewed and approved by a human editorial team?
• 1:45
  Speaker 0: The analysis and voices are AI—the responsibility is not!
• 1:50
  Speaker 1: Today I want to understand... Was the thirtieth of July an excess of panic...?
• 1:54
  Speaker 1: Or did the markets see something that got lost on the celebratory headlines?
• 1:59
  Speaker 1: But first for context….
• 2:00
  Speaker 1: Warren Where does Adidas stand for you?
• 2:03
  Speaker 0: On a three out of five.
• 2:04
  Speaker 0: With us, that level is called watch list.
• 2:07
  Speaker 0: not yet investable
• 2:08
  Speaker 1: Not Yet.
• 2:09
  Speaker 1: That sounds like close call.
• 2:11
  Speaker 0: It's Close.
• 2:12
  Speaker 0: The Three Is the Threshold.
• 2:14
  Speaker 0: Below it things get critical Above it Interesting.
• 2:17
  Speaker 1: And the Survival Test
• 2:18
  Speaker 0: In my so-called Graham test its only about knockout criteria.
• 2:22
  Speaker 0: distress crushing debt doubts about balance sheet.
• 2:26
  Speaker 0: adidas passes that and A rating from Standard & Poor shows too even an upgrade.
• 2:32
  Speaker 1: So, no drama?
• 2:34
  Speaker 0: No drama but still only a three.
• 2:36
  Speaker 0: That's why I'll show you what the market and my report actually saw.
• 2:40
  Speaker 1: Were the quarterly numbers bad
• 2:42
  Speaker 0: on revenue?
• 2:43
  Speaker 0: quite the opposite up thirteen percent in The second quarter six point seven billion euros the best quarter In the company history.
• 2:51
  Speaker 1: And where is the problem?
• 2:52
  Speaker 0: one level down.
• 2:53
  Speaker 0: the operating margin for the quarter was expected by the market to rise To nine point five percent.
• 2:59
  Speaker 0: instead it declined to eight point five.
• 3:02
  Speaker 1: Why?
• 3:02
  Speaker 0: The costs for the World Cup.
• 3:04
  Speaker 0: Adidas outfitted more than twenty federations plus balls and marketing.
• 3:09
  Speaker 0: that money goes now, the revenue comes later
• 3:12
  Speaker 1: And the profit.
• 3:13
  Speaker 0: Now comes number that probably tipped stock Revenue up thirteen percent.
• 3:18
  Speaker 0: Operating Profit Up only six.
• 3:21
  Speaker 0: So profit grew barely half as fast as revenue.
• 3:24
  Speaker 1: Revenue is growing more then twice as fast As profit.
• 3:28
  Speaker 0: That's negative operating leverage.
• 3:30
  Speaker 0: Normally, you want the opposite.
• 3:32
  Speaker 0: When revenue rises profit should rise faster because part of the costs is fixed.
• 3:38
  Speaker 0: Here it's other way around like a car burning more fuel The Faster It Goes.
• 3:43
  Speaker 1: And how was the outlook?
• 3:44
  Speaker 0: The second blow Adidas raised its Revenue Outlook but left the Profit Target unchanged.
• 3:50
  Speaker 1: So More Revenue Promised But Not More Profit!
• 3:53
  Speaker 1: The Market Hears The Extra Growth Is Being Eaten Up By Costs.
• 3:57
  Speaker 0: Exactly that message And, importantly those are the numbers from the thirtieth of July.
• 4:03
  Speaker 0: My report is the analysis of The Annual Report for twenty-twenty five and there a related pattern was already visible back in March record on top substance fading underneath.
• 4:15
  Speaker 1: then let us first weigh up what Was Already Good In The Equity Story?
• 4:19
  Speaker 0: That's A Lot Because The Recovery Is Real.
• 4:22
  Speaker 0: Operating Profit For The Full Year.
• 4:24
  Speaker 0: Twenty-Twenty Five Rows To About Two Billion Euros.
• 4:27
  Speaker 0: A Strong Jump.
• 4:28
  Speaker 1: And the margin?
• 4:29
  Speaker 0: From five point six to eight point three percent.
• 4:32
  Speaker 0: That's not a baby step, that's a
• 4:34
  Speaker 1: leap!
• 4:34
  Speaker 1: So Adidas is almost its old self again...
• 4:37
  Speaker 0: On revenue yes nearly twenty-five billion more than ever before in the company history.
• 4:43
  Speaker 1: and on profit
• 4:44
  Speaker 0: there still a gap.
• 4:45
  Speaker 0: In The Old Record Year of Twenty Nineteen about eleven cents Of every Euro of Revenue stayed as Operating Profit.
• 4:51
  Speaker 0: Now it's About Eight.
• 4:53
  Speaker 0: so the earnings power isn't fully back yet.
• 4:55
  Speaker 1: So revenue Is Back at Record Level.
• 4:57
  Speaker 1: Earnings power isn't yet.
• 4:59
  Speaker 0: And that's exactly the benchmark this comeback wants to be measured against.
• 5:03
  Speaker 0: The direction is right, the last stretch is still missing.
• 5:07
  Speaker 1: Did that happen under its own power?
• 5:09
  Speaker 0: and here I have to be precise.
• 5:11
  Speaker 0: Part of last year was still carried by Yeezy –the old Kanye West line.
• 5:15
  Speaker 0: But the core brand carried growth on it's own.
• 5:18
  Speaker 0: That's an important point.
• 5:20
  Speaker 0: Currency adjusted, thirteen percent growth.
• 5:22
  Speaker 0: Double digit in all six regions All six growing together.
• 5:26
  Speaker 1: And the balance sheet, how does that hold up?
• 5:29
  Speaker 0: So a
• 5:39
  Speaker 1: credible comeback after two very hard years.
• 5:42
  Speaker 1: That sounds like more than a score of three!
• 5:53
  Speaker 1: Quick word in our own interest since it fits... What you're hearing is the short version.
• 5:58
  Speaker 1: The full analysis, with all of
• 6:23
  Speaker 0: What's left at the very bottom for shareholders.
• 6:26
  Speaker 0: In twenty-twenty five it rose by seventeen percent.
• 6:29
  Speaker 1: And what actually came in as cash?
• 6:32
  Speaker 0: Take a guess.
• 6:33
  Speaker 1: Also double digit, twenty per cent up
• 6:36
  Speaker 0: Down seventy four per cent.
• 6:37
  Speaker 1: Wait...in the same year The same company
• 6:40
  Speaker 0: Same company, same year From nearly three billion down to seven hundred and fifty one million.
• 6:46
  Speaker 0: My report calls that a striking gap between profit on paper & cash in the bank.
• 6:51
  Speaker 1: Where did stand for Adidas
• 6:52
  Speaker 0: The year before?
• 6:53
  Speaker 0: at one eighteen, more than fully covered.
• 6:55
  Speaker 0: Excellent!
• 6:56
  Speaker 0: Now at zero point two
• 6:57
  Speaker 0: four.".
• 6:58
  Speaker 1: So of every euro in the books only about a quarter arrives as cash?
• 7:03
  Speaker 0: Roughly.
• 7:04
  Speaker 0: and then comes the sentence that makes me sit up free cash flow.
• 7:08
  Speaker 0: what's genuinely left over was lower than the dividend Adidas paid out.
• 7:12
  Speaker 1: so the payout is bigger Than What Comes In.
• 7:15
  Speaker 1: That's like paying my everyday expenses not from My salary but From my savings.
• 7:20
  Speaker 0: And it's Not an Alarm But it's the kind of number where the coach takes his eyes off the split time and starts watching the runners breathing.
• 7:27
  Speaker 1: But, Where did money flow?
• 7:29
  Speaker 0: Into inventory stock rose by eight hundred forty three million euros currency adjusted by twenty-three percent
• 7:36
  Speaker 1: And revenue?
• 7:37
  Speaker 0: Grew by barely five.
• 7:39
  Speaker 0: so inventory is running four times as fast.
• 7:41
  Speaker 0: sales goods sitting in warehouse are money that isn't working.
• 7:45
  Speaker 1: The explanation?
• 7:49
  Speaker 0: Management says we're deliberately pre-positioning the goods for The Big Sales year, and that's plausible.
• 7:55
  Speaker 0: A World Cup is planable—the demand is
• 7:58
  Speaker 0: coming.".
• 7:59
  Speaker 1: Is that plausible, Warren?
• 8:00
  Speaker 0: Directionally yes!
• 8:02
  Speaker 0: It's like a runner before the start —deliberately storing energy….
• 8:06
  Speaker 0: That's foresight...The question is only whether it's released later or if just sits there as weight.
• 8:12
  Speaker 1: And you are finding…?
• 8:13
  Speaker 1: In
• 8:13
  Speaker 0: terms of scale – its serious Over a billion euros is locked in working capital.
• 8:18
  Speaker 0: That's real money that isn't available right now, and that's why the honest question is Is this a bet or it foresight?
• 8:25
  Speaker 1: If yes It was preparation.
• 8:27
  Speaker 1: if no The goods sit there And eventually have to go out at discount.
• 8:32
  Speaker 0: Exactly so!
• 8:33
  Speaker 1: How does that feed into the score?
• 8:35
  Speaker 0: Four dimensions Sit on three Cory.
• 8:38
  Speaker 0: For first two Cash is common thread.
• 8:41
  Speaker 0: First financial strength Because cash conversion collapsed and free cash flow didn't cover the dividend.
• 8:47
  Speaker 1: And the second?
• 8:48
  Speaker 1: Capital
• 8:49
  Speaker 0: allocation, The question of what a company does with its money... ...and here it gets specific.
• 8:54
  Speaker 0: For twenty-twenty six Adidas is planning the biggest dividend in a long time about one and half billion euros.
• 9:01
  Speaker 1: So one and a half billion to shareholders from a pot that lately took in less than three quarters Of one billion in cash.
• 9:08
  Speaker 0: My report puts It In One Sentence net debt rose by more than a billion euros in a single year.
• 9:17
  Speaker 1: Out of the balance sheet means Adidas takes on new debt or draws down reserves to fund the payout, is that dangerous?
• 9:24
  Speaker 0: Not yet.
• 9:25
  Speaker 0: Measured against profit ,the debt is moderate .
• 9:27
  Speaker 0: The rating holds but there's one figure That makes me cautious interest coverage fell from nearly double covered To just about
• 9:34
  Speaker 1: half From nearly double-covered to Just About Half In A Single Year.
• 9:40
  Speaker 1: That's as if my salary suddenly only covered half of what it used to.
• 9:44
  Speaker 0: And in that very year, they announced the biggest payout in a long time.
• 9:48
  Speaker 0: for completeness.
• 9:50
  Speaker 0: Interest coverage of about half is not critical in absolute terms but the direction is what matters.
• 9:56
  Speaker 1: Handing out the prize money before the races run...
• 9:59
  Speaker 0: ...that's how I'd put it!
• 10:00
  Speaker 1: and What else is dragging the score down?
• 10:03
  Speaker 0: Risk transparency?
• 10:04
  Speaker 0: Adidas names fifteen material risks quantified in concrete euro amounts.
• 10:09
  Speaker 0: none
• 10:09
  Speaker 1: of them even though it's calculated
• 10:17
  Speaker 0: internally?
• 10:23
  Speaker 1: So without concrete amounts and probabilities, I can only hardly judge what happens if one of those risks actually hits.
• 10:30
  Speaker 0: Is
• 10:35
  Speaker 1: there anything else that corrects the score downward?
• 10:39
  Speaker 0: Not because Adidas doesn't develop, but because the report barely describes it in a tangible way.
• 10:45
  Speaker 0: For a company whose whole future rests on product that's too
• 10:48
  Speaker 0: little.".
• 10:49
  Speaker 1: Is there anything else beneath this surface?
• 10:51
  Speaker 1: I should know?
• 10:51
  Speaker 1: Two
• 10:52
  Speaker 0: things... The first are US tariffs.
• 10:55
  Speaker 0: Adidas manufactures about ninety-two percent of Asia and sells large shares into United States.
• 11:01
  Speaker 0: Tariffs raise costs… And the group absorbs them centrally.
• 11:05
  Speaker 1: Why does that matter?
• 11:06
  Speaker 0: Because the regional figures look better than business there actually is.
• 11:10
  Speaker 0: North America grew, but tariff cost doesn't sit in region.
• 11:14
  Speaker 0: it sits at group level.
• 11:16
  Speaker 1: So the region does not pay tariffs?
• 11:18
  Speaker 1: The group carries them centrally and from outside.
• 11:21
  Speaker 1: I can see how much of profit that eats up
• 11:24
  Speaker 0: Exactly!
• 11:25
  Speaker 0: And second good news Last year's revenue still contained final sales of Yeezy inventory.
• 11:31
  Speaker 0: That has gone.
• 11:32
  Speaker 0: yet Adidas is growing double digit.
• 11:35
  Speaker 0: The base is now the pure brand.
• 11:38
  Speaker 1: So,
• 11:42
  Speaker 0: that's why business model and market position both earn a four?
• 11:50
  Speaker 1: We've heard a lot by now!
• 11:52
  Speaker 1: Walk me through again Why.
• 11:53
  Speaker 1: Adidas gets score of three And his only watch list Not yet investable
• 11:59
  Speaker 0: Eight dimensions.
• 12:00
  Speaker 0: You know all readings One five for leadership in governance Two fours for business model and market position, And Four threes.
• 12:08
  Speaker 0: Financial strength Capital allocation Risk transparency Innovation.
• 12:13
  Speaker 1: What does that average out to?
• 12:15
  Speaker 0: Just under three point six.
• 12:17
  Speaker 1: That would round the score to a four The second highest level.
• 12:20
  Speaker 0: If I were computing an average.
• 12:22
  Speaker 0: Yes But i don't compute an average.
• 12:25
  Speaker 0: Only now do checks begin.
• 12:27
  Speaker 0: The consistency check doesn't ask whether the individual values are good, but whether the overall picture hangs together.
• 12:35
  Speaker 0: And it finds hard contradictions all tied to cash.
• 12:38
  Speaker 0: profit up money down dividend not covered.
• 12:41
  Speaker 0: that kind of thing costs half a point.
• 12:43
  Speaker 1: in the monger test
• 12:45
  Speaker 0: That one looks for recurring patterns and It has triggered.
• 12:48
  Speaker 0: One pattern is active capital deployment paying out from the balance sheet instead of from cash flow another half-point.
• 12:56
  Speaker 0: Still, it doesn't escalate to systemic risk.
• 13:00
  Speaker 0: That would have cost a whole point.
• 13:02
  Speaker 1: So its not the average that puts Adidas on The Three It's the deductions.
• 13:06
  Speaker 0: My scoring is precisely not compensatory.
• 13:08
  Speaker 0: A strong dimension can't offset a weak one.
• 13:11
  Speaker 0: Two active patterns each cost a point.
• 13:14
  Speaker 0: Thats exactly what turns the three-point six into a three.
• 13:17
  Speaker 1: Wait!
• 13:18
  Speaker 1: two deduptions One root.
• 13:19
  Speaker 1: Isn't same thing being punished twice there?
• 13:22
  Speaker 0: No They are two different offenses.
• 13:24
  Speaker 0: The Buffett test punishes the state, profit and cash contradict each other.
• 13:29
  Speaker 0: The Munger Test punishes a decision announcing the biggest payout in this very year.
• 13:34
  Speaker 0: had Adidas held it back –the second half point would not have fallen– the first still
• 13:39
  Speaker 0: would.".
• 13:40
  Speaker 1: What Would the Board Have to Answer For You?
• 13:42
  Speaker 0: First… And This Is The Most Important Question When Does The Inventory Build Turn Back Into Cash?
• 13:48
  Speaker 0: I Want To See It Reverse In Next Report.
• 13:51
  Speaker 1: So not the vague answer sometime after The World Cup, but a concrete date.
• 13:56
  Speaker 0: Second I'd ask the board when will tied up capital be back inside your own target band and by what day?
• 14:02
  Speaker 1: And the third question is about the money i assume.
• 14:05
  Speaker 0: Third explain to shareholders that one-and-a half billion payout for twenty twenty six.
• 14:10
  Speaker 0: does it come from strength or Is It A signal That's being funded out of the balance sheet?
• 14:15
  Speaker 1: and now For context before Anyone gets the wrong idea A three on the day of a seventeen percent drop.
• 14:21
  Speaker 1: So that is not a cell signal?
• 14:23
  Speaker 1: No,
• 14:24
  Speaker 0: and that's not illegal disclaimer but methodological limit.
• 14:28
  Speaker 0: We assess how well a company has positioned Not what its stock is worth any given day.
• 14:33
  Speaker 1: The price doesn't come into it at all
• 14:35
  Speaker 0: Not in the score.
• 14:36
  Speaker 0: An excellent company can be miserable if you pay too much.
• 14:39
  Speaker 0: Quality & Price are two separate steps we do first.
• 14:43
  Speaker 0: second is yours.
• 14:44
  Speaker 1: And What raises or lowers the score?
• 14:46
  Speaker 1: What should I watch for in the next report?
• 14:51
  Speaker 0: And if
• 15:01
  Speaker 1: someone reaches a completely different conclusion,
• 15:04
  Speaker 0: then they may be right.
• 15:06
  Speaker 0: An investor with In this case, my yardstick is the cash.
• 15:17
  Speaker 0: And it says clearly watch don't invest.
• 15:20
  Speaker 0: yet.
• 15:21
  Speaker 0: that's the judgment I'll stand by.
• 15:23
  Speaker 1: Warren what do i take away practically?
• 15:25
  Speaker 0: Three things and all three.
• 15:27
  Speaker 0: The Adidas Case just showed us first always read the cash flow statement not Just Profit.
• 15:33
  Speaker 0: profit Is an opinion Cash is a fact.
• 15:36
  Speaker 1: and second
• 15:37
  Speaker 0: compare inventory growth with revenue growth.
• 15:40
  Speaker 0: if inventory runs faster money as being stored on the shelf.
• 15:44
  Speaker 1: And third, look
• 15:45
  Speaker 0: at what a company wants to pay out and hold it against what actually comes in.
• 15:49
  Speaker 0: The gap between the two is where the story really lives.
• 15:52
  Speaker 1: In my own rule when a company explains why a bad number is good this time I note down exactly that explanation and check it against the next report.
• 16:02
  Speaker 0: A Good Rule.
• 16:03
  Speaker 0: That's Exactly How A Value Investor Thinks.
• 16:08
  Speaker 0: The World Cup was Adidas's record split time, the brand on every stage revenue at an all-time high.
• 16:14
  Speaker 1: And at that same time?
• 16:16
  Speaker 1: That
• 16:16
  Speaker 0: same split time cost energy.
• 16:18
  Speaker 0: it inflated marketing and filled the warehouses.
• 16:21
  Speaker 0: one event three effects and two of them show up in the cash...
• 16:25
  Speaker 1: ...and two of those three effects are unpleasant.
• 16:28
  Speaker 1: so the question isn't how fast the runner was a kilometer thirty
• 16:32
  Speaker 0: but whether the strength lasts to finish weather.
• 16:34
  Speaker 0: the stored energy actually arrives into race.
• 16:37
  Speaker 0: That's why the score is a three, promising but not yet proven.
• 16:41
  Speaker 1: And The Lesson?
• 16:42
  Speaker 0: Sometimes the event that makes the finest headline Is the same one that empties the till.
• 16:47
  Speaker 0: Revenue is glory because it makes the headlines.
• 16:50
  Speaker 0: Cash is truth Because It shows what really left in the till.
• 16:54
  Speaker 0: at end.
• 16:55
  Speaker 1: We'll stay on it
• 16:56
  Speaker 0: Until next deep dive.
• 17:04
  Speaker 0: Be wise when others go crazy.
• 17:09
  Speaker 0: You're Warren Wise.
• 17:15
  Speaker 2: Out.
• 17:15
  Speaker 2: for the record, Warren Wise is a fictional synthetic character.
• 17:21
  Speaker 2: His thinking and his voice are generated by artificial intelligence.
• 17:26
  Speaker 2: This podcast Is For Information And Educational Purposes Only.
• 17:31
  Speaker 2: It's not investment advice Not recommendation to
• 17:35
  Speaker 1: buy hold
• 17:36
  Speaker 2: or sell any security.
• 17:38
  Speaker 2: The analysis is based on publicly available information and may contain errors.
• 17:44
  Speaker 2: Always make your own decisions, when in doubt consult a qualified financial advisor.