Adidas Recovery Hinges on Footwear as Growth Stalls, Baird Analysts Say

Adidas AG's (ADSGn) recovery prospects remain credible, but slowing growth in its critical footwear division and persistent market-wide discounting are raising concerns about the pace and profitability of its turnaround, according to an analysis by Baird.

A Mixed Outlook

Baird analysts noted that the German sportswear company's brand positioning remains strategically strong, supporting a multi-year earnings recovery. A key positive sign was a 6% growth in the wholesale channel during Q2 2026, which indicates that retailer demand is currently healthy and provides an important distribution tailwind for the company.

The positive view assumes that this brand strength and product momentum will eventually translate into improved revenue growth and operating leverage. However, analysts flagged several points of concern that temper this outlook.

Footwear and Margin Pressures

The central issue is the performance of the footwear category, which is fundamental to the brand's economics. Baird highlighted several risks to the recovery thesis:

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• Stalled Footwear Growth: The segment grew by only 1% in Q2 2026, a significant slowdown for a category that typically holds the strongest recovery potential.
• Widespread Discounting: Heavy promotional activity across the U.S. and European markets is pressuring full-price sales and gross margins.
• Wholesale Risk: Sustained discounting from competitors could make retail partners more cautious about placing future orders, potentially making the recent 6% wholesale growth difficult to sustain.
• Macroeconomic Headwinds: Softer consumer conditions, particularly in Europe, could further dampen retailers' willingness to commit to new inventory.

The Path Forward

According to Baird, the investment debate is shifting from whether the brand can recover to whether that recovery can broaden beyond apparel and into the crucial lifestyle footwear segment. Adidas management has reportedly acknowledged continued pressure in lifestyle footwear, even as performance categories show strength.

Management has indicated that wholesale footwear could see improvement in Q4 2026 or early 2027 as retailer inventories normalize. Baird's analysts concluded that while they remain positive on the brand's health, their investment thesis has become more dependent on a successful "footwear repair."