UBS downgrades adidas to sell as footwear slowdown threatens 2027 growth

UBS downgraded Adidas AG (LON:0OLD) to "sell" from "neutral", warning that fading footwear momentum and mounting margin pressures could leave the sportswear maker struggling to meet its growth ambitions in 2027.

The bank also cut its 12-month price target to €156 from €160, implying around 10% downside from Monday's closing price of €172.85. UBS said the shares had recovered around 20% from their early-October low, creating a growing disconnect between the valuation and the company's near-term earnings outlook.

In a research note, UBS said strong World Cup-related sales and the introduction of new apparel products had supported about 10% sales growth in 2026, masking a more challenging underlying consumer environment.

It expects industry growth to remain in the low single digits in both 2026 and 2027, compared with a historical high-single-digit average. The main concern is whether adidas can maintain its high-single-digit growth ambition after the 2026 World Cup.

UBS forecasts foreign-exchange-adjusted sales growth of 4% in 2027, below the 7% analyst consensus, as the momentum behind the company's popular Terrace footwear range fades and newer franchises such as Superstar and Stan Smith struggle to fully replace it.

Lifestyle sales increased just 4% in the first nine months of 2026, compared with 27% growth in performance products. Running growth also moderated to 19% in the third quarter from 28% in the previous quarter, UBS noted.

Margin pressures add to the risks. UBS expects adidas' 2027 gross margin at 51.3%, below the 52.3% consensus, citing higher oil-related input costs, less favourable product and channel mix, and the reversal of tariff-refund benefits from 2026.

More than 60% of the company's raw-material costs are oil-related, while a stronger dollar could create additional pressure as currency hedges roll through in 2028.

UBS estimates adidas' 2027 EBIT margin at 9.1%, below the 10% consensus, and forecasts 2027-28 operating profit more than 10% below market expectations.