adidas AG (ADS) Earnings Call Transcript

Ladies and gentlemen, welcome to the adidas AG Q2 2026 Conference Call and Live Webcast. I am Moira, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions]. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Sebastian Steffen, Head of Investor Relations. Please go ahead.

Thanks very much, Maura, and hello, everyone. Good evening, good afternoon and good morning, wherever you're joining us today. Welcome to our Q2 2026 results conference call. Our presenters today are our CEO, Bjorn Golden; and our CFO, Harm Ohlmeyer. Before Bjorn and Harm will take you through the key developments of the second quarter and share -- so before Bjorn and Harm will take you through the key developments of the second quarter and share their expectations, let me just quickly remind you that initial to. And now without any further ado, over to you, Bjorn.

Thanks, Seb, and hello, everybody. Yes, you have seen our announcement. We have seen the reaction. I'm sure we will have a lot of interesting questions. But before we go into the update of the business, you have also seen the other announcement that says that Harm that decided not to extend his contract when it goes out in March '28, have now announced that he will leave and that we have found a successor together in [ Birgit]. And I think before I go into that in detail, I think I can hand over to you, Harm, so you can say a couple of words.

Yes. Thank you, Bjorn. And yes, of course, it's one of our jobs as leaders to find a good successor, and I'm very, very pleased that we have found Birgit. And I'm even more pleased that I'm in the -- it will be a smooth transition because I know her very well. And then secondly, we're handing over a very, very healthy business to her. So I'm really, really pleased with that transition. Of course, I'm also very privileged to talk about 29 years with the brand and 10 years of serving as a CFO -- that has been a privilege. I always joke that my kids who are 27 and 25 don't know anything else about adidas. That has to change at some stage. But again, I'm very, very pleased with the support that I got from the Board, from many of you over the last 10 years. And of course, I will be around for another quarter or a bit longer until year-end. So stay tuned for that one. And of course, the timing is always something you decide like any -- amid does as well. And as Bjorn said, when you're not going to extend your contract, you start thinking about what is the right timing. And I believe handing over a well-run company now, of course, can always get better, but it feels very, very good and having the right successor feels even better. So I'm really looking forward to the next couple of months. And then I'm very respectful for the time afterwards, but I'm also looking forward to that. So stay tuned.

Thanks, Harmon. I think also from my side, I'm sure we will talk about this later. But when I came on board, one of the requirements for me was that you would stay. So I had a guy I knew and I could trust so we could start the process of bringing the company back again. So for now, also thank you, and I'm sure we will talk more about that later. And in that process of finding a successor, we had then the luck, to be honest, to find Birgit, who spent 25 years with the company earlier, then left to learn retail being the CFO of CNA. And when she then had the chance to become available, we took the chance that, that is then the timing of this David will join us September 1 and then stay in the Board. Harm will be the CFO until the end of the year, and they will then work together to make a smooth transition. So very, very happy. I think she knows the company. She knows the industry. And again, now having worked for a vertical retailer, she also brings with her the retail competence that is great to have. So to close that and move into the business update, it should be a surprise for you that we would like to celebrate also in your eyes a little bit of World Cup. Again, a great event. And here is a little bit reminder of our visibility in that tournament. [Presentation]

I hope you agree. It was a great tournament and especially for us and me and probably like you feel I'm a soccer expert. And I summarized the tournament as follows: France had the best players, Spain had the best team. Argentina, the best attitude playing for the flag, the country and for Messi. But then the most fun team was, of course, the Norwegians. I think it was a great pleasure to see my countrymen not only performing, but also being extremely visible. And I can tell you, it shows you how much impact tournament has at home. I don't think Norwegians have been in such a good mood as long as I've been on this planet. So it's good to add. Again, Spain winning the tournament. Again, having been with us, we have a fantastic relationship to the Federation. I think you agree they look good. One of the ways of showing how close we are is this picture, the day after the tournament when they celebrated their bus was branded only with us and the team. and many, many other players, of course, also playing in our shoes. And our sports marketing has a great relationship with the Federation that currently is by far the most successful one in soccer in general by male, female and also in the youth. I am also, as I wrote in my quote, extremely proud of what the team has done in general when it gets to campaigns, planning the product, planning the activations. I think I said I believe even adidas will have been proud. And I probably think it's the best executed campaign that has ever happened in this industry when you look across the globe. I will also quickly just summarize the tournament because there was a lot of criticism before, too many teams, 3 nations, too many cities. And when you look at it, I think the additions of the teams only made it more interesting. It was kind of cool to see C playing. The stadiums were full. The atmosphere was great. And for us, having 14 teams that I think we equipped well to reaching the final. You know that we sold close to 18 million jursees, which again is far, far more than we have ever sold before. And of course, Mexico being the best, our friends in Argentina, the second. And even Germany, who didn't have a great result had commercially a much bigger success than we've seen before. I have seen in the commentary that I think there is some misunderstanding on how our World Cup sales is being done. You have to remember that we started selling in World Cup product delivering into the trade already in Q4 last year that had both sell-in and sellout in Q1 and Q2. And to be honest with you, we're still selling World Cup product, as you can imagine, especially now in Spain because the jersey now has 2 stars. So the period for this 1.5 billion to 1.7 billion is, of course, not only in the summer months. And I think in some of your spreadsheets, I think this has been a misunderstanding. When you then look at the campaigns, again, yes, we spent EUR 212 million more marketing in the quarter. I think we told you that also upfront. And of course, that doesn't have a payback in commerciality in the same period. We meant or was sure that for the brand heat going forward and also during the tournament, we had to invest in media, and we choose to do a lot of activations around the world to showcase the brand. If you also look at our campaign, back at Legends, it was to bring back the beauty of soccer the way we used to play it at home and not so serious. And everything that we can measure the engagement around this campaign was great. And the creatives are very proud that it is now even being nominated for an Emmy. So let's see if we have a chance. The way we looked on the pitch, I hope you agree, designs, both home and away, great. Mexico, even with the third jersey, we look fresh. Remember, we did double branding. We had the performance logo and wider stries on the home. And then we had the tifoil and the narrower stripes on the way. We did also, for the first time in history, equip the referees with a lot of variations. First of all, they all had free stripes, never happened before, and we gave them different colors depending on how the 2 teams were playing. We did also change the Tria ball for the -- for the semifiles and the final into the gold version and the referee then had black with gold logos. I think it's the first time we started to get orders for referee jerseys around the world that people would like to buy. Also, the event itself and not only the game, but the opening, what should I say, halftime and opening shows, the ball caps that you see in the right corner, we used our celebrities, our partners and made it an event much, much bigger than only the 2 game teams playing at each other. And I can assure you that everybody that was involved felt very, very, very happy being part of it. Then the culture around it, we had activations, as I said, all over the world. You see on the upper right corner on the left side, the home of soccer in New York, which had more than 0.25 million visitors. And we had basically activations in all markets where we then both made it an event, watch games, have concerts and again, put color to the tournament branded, of course, with our adidas product. And then stores, and I think this is also important. Of course, we then put more space to this kind of product in our stores, also in cities, in countries that were not qualified. And the reason for this was not only to increase sales, which happened in many places, but of course, to celebrate the event. And here it is important that when you put World Cup products in, you have to take something out. That's why you cannot just add it on top because, of course, it's cannibalizing some other products that would have been there. When the tournament is over and World Cup is out, then, of course, something else gets in. So you can never take an event and just add it to the spreadsheet because that's not how retail works. The activations, which had many different goals. Here you see from Mexico, where we had a huge event day before the opening, again, to activate the moment. Same thing we talked about New York, where we had celebrities, concerts, games, new tournaments, the stores here, for example, in Paris, -- we had even in China who wasn't qualified a huge activation celebrating our campaign and the tournament. We even had Ped flying from Spain to China right after the tournament to continue the soccer culture heat that is building also in China. And the story goes on, here's from Sydney, here's from Japan. And when you put it all together, the branding of the adidas campaign visible everywhere. So everything that we have control over, we were very happy, except for one thing, and this is this picture, you did probably notice that suddenly all the brands had pink goods, which, of course, none of us was happy with. cannot explain you how it happened. Probably retail should have told us they didn't, and we ended up in the first games looking the same. We then tried as quickly as we could to get our sports marketing to change into the new collection, which is now going into store. So as of the quarter final, you would have seen many of the players going into the new colorway, which is then white, dark blue and red. Again, I hope next time, we are better at not having the same colors. Not only soccer, in general, I think the visibility of our brand across many, many sports being golf, being Formula 1, being tennis, being Ruby, whatever and running has never been stronger. And again, we are investing in more partnerships to strengthen the visibility in sports because as you know, we reduced that some years ago, and I'm starting to be very, very happy on how we look in the different stadiums and arenas and also the content that is then being produced in media. So all that then caused a sales of EUR 6.7 billion, which is the highest nominal value we have ever done in a quarter, and that is a 14% currency-neutral growth. The gross margin above 52%, of course, also led by the high share of D2C, which we will get back to, but also controlling the markdown and having a big share of full price sales. And that gives us then the famous EUR 574 million EBIT despite us having invested EUR 1 million more in marketing. And as we have said now many times, this overinvestment in marketing would, of course, not continue in Q3 and Q4. If you add Q2 into Q1, you get the SEK 13.3 billion, which is also nominal, the highest that we ever had, which then also for the full half year gives you 14% growth. margin a little bit lower in Q1. So that's at 51.8%. Remember, the share of D2C was then lower, and that gives you then a half year result of EUR 1,279 million, which is an EBIT percentage of 9.6%, which is then also despite the EUR 200 million more marketing, still almost a 10% EBIT. If you look at the geographies, you see Q2 on the left side and first half on the right side. So North America, again, we know we have a lot of catch-up to do, but strong numbers with 17% and 15%. Europe at only 6%. I have to remind you again that the growth in Europe, the last 2 years have been very strong. get back to what the numbers were in D2C. Greater China in a market where big competitors are having negative numbers, very strong at 15% and 16%. The combination of South Korea and Japan, 18% and 21%. LatAm on fire, especially in Mexico, but also, of course, in Argentina and Brazil, 28% and 27%. And then emerging markets, despite 10 of the markets practically being in war, up 12% and 11%. And again, you summarize it and you're then at the 14%, both for the quarter and for the first half. When you then look into the channel, the wholesale -- and remember, wholesale is where we sell into the trade, not out, but into the trade at only 6%. This has been the pattern for a long time. And when we started the sell-in period for Q1 and Q2, it was actually flat. And then an unbelievable growth in the D2C business with 23% in our brick-and-mortar and even 27% in e-com. And remember, this is sell out to the consumer and then tells you the demand for other products with the consumers. That gives you then a split of 57-43. Again, this is not a strategic move, but it's actually what the consumer is choosing. I'll give you now the D2C numbers per region, just to understand how strong the demand was. You see in North America, the D2C in the quarter was even 39%; in Europe, 12%, so twice what the sell-in demand was. Greater China at 22%, LatAm at 37%, emerging at 24% and the combination South Korea and Japan at 25%. I'm telling you this because it is a great situation to be in that the sell-out is stronger than sell-in. I have never seen numbers like this before. And again, that's probably why we are celebrating a little bit more than you do because we clearly see that product and marketing and how we activate it is actually working for both her and him. If you then look at the execution, same thing, both our e-com and our physical stores of course, with global concepts, but then localized depending on what is relevant. That's why you see front of stores and also the different pages in e-com then being targeting to the demand in the market. If you then look at divisions, yes, footwear growing at only 1%, apparel growing at 35% and accessory growing at 20%. I don't know if you remember, but we did flag this to you 6, 9 months ago that we would see a stagnation in footwear, especially on the lifestyle side because of the amount of product in the market, but that we will see a demand for apparel growing dramatically, not only because of World Cup, but of course, also because of World Cup. I think you agree that when people are buying product to go to the stadium, they buy replicas and tops and not necessarily shoes. -- and the accessory business is following the heat of the brand. You will continue, in my opinion, when I look at the order book to see footwear being flattish in third quarter, but then you will start to see it growing again in the fourth quarter. So again, you cannot plan this in details because you don't know what is happening in the D2C business, but the pattern has been known for a long, long time. That means that in the mix in the quarter, footwear is 52%, apparel at 40% and accessories at 8%, you will see this start to change again to be more footwear led at the back end of the year. And then again, we are a sports brand first. That's what Andy gave us. We are investing in performance. I told you 3, 4 years ago that we will try to create heat around the brand, sell lifestyle product and then get the consumer into our performance product because they like the brand. And we thought already then that we will have technologies and product, what should I say, pipelines that would start to work as we were getting closer to '25 and '26. And that's also what happened. You see here the performance business is growing at 39%. Yes, football, of course, inflated by World Cup, but running now, I think, for the third quarter, growing only almost 30%, trading almost double digit and motorsport growing 70%. The only negative number here that I would be, what should I say, working hard on is the basketball, but I've told you that, that will take a little bit of time. And remember, this is performance basketball, so the absolute number is actually very small. If you then look at the different categories from the consumer point of view, I think it's fair to say that we are winning and running. We are winning competitions on the road, on the track. We are sponsoring big events and our running shoes in general are having great sell-throughs, which was not the case 3 years ago. The category training, again, everything that is hybrid training is growing fast. Yes, we are not the partner of the events, we sponsor a lot of athletes and are seeing a great demand both in IROC and in CrossFit, and you see some of the winners on this picture. In general, the visibility in sports, winning events and therefore, getting the image of being a performance brand again is strengthening. You see some of the sports here, and I will note Son is a name of the Turkish Women's vulnerable team who won the Nations League, which is a new asset for us. And again, probably the most known team for women's sports in Turkey, again, a great thing for us. So the recipe in performance, we have told you, you launch technologies to win events and be visible the designs and then you scale it into the commercial, A, Evo3, EvoSL. And here, you see both the EOSL from a running point of view and then stretched even into [ SFZier, ] yes, is the EOSL construction with a iper and with different stripes execution going across the upper. -- many, many versions about this and a huge success both in the running side and in the lifestyle side. In soccer, the same. Here, you see F50 HyperFast EO, which is the shoe that the professional player is playing out. And then the takedown in the new color where we take the same look and feel almost the same glass even down to the price point of EUR 60. So hero to high in all categories. Also in training, here you see maybe the most innovative training shoe for hybrid training, meaning Fyrox. And then the takedown, which is then a huge commercial shoe with bookings over 1 million pair already, same system. If you then look in general, we have talked to you about printed technologies. So now we have a printed basketball shoes, which is being played in college and also will be played in NBA. Some of the players are now having it in the summer season camp. The second shoe is the printed soccer boot that one of the MLS players, Cap Sullivan played already last week, fully printed shoe. So the technology of printed shoes is now also hitting the top ad, which is new. First thing that a shoe on women's is a long, long time. You see it here from Sofie Cunningham, Same thing again, dedicated to her selling very well already in retail. And then because of the investment in Vollyball, the Crazy Flight 7, same thing. Innovation also in apparel, you see the cooling west and the cooling jacket that we had in Formbla 1 was now transferred into the workup. So the teams were wearing the same equipment. We even have cooling boots for the players so they can actually wear while they were sitting before the games or during the game, if you want the bench. We had Fer in our 3D drama cool winning the French Open. And of course, we have now many versions of the HyperBoost hitting the market, which, in my opinion, is the best foam that you can have in comfort running. I think we told you before that the 23rd and 24th of September, we will have an Innovation Day, which you will be invited where our innovation people will then take you through the pipeline of innovation, both conceptually and also finished product so that you can ease at the belief that we have lack of innovation because we don't. So then we know that the performance side over time drive the lifestyle side. You also know that we have had a great success on the lifestyle side of the last 3 years. The lifestyle business in the quarter was, of course, less, so only 2%. And now we need to be honest that part of the football product that you saw is growing almost 80% are, of course, lifestyle product, and it's classified as football. So I think if you really honest, the consumer that used to buy a sportswear and original product in this quarter has also bought football product. So maybe that is a little bit misleading, but it's very hard to classify this accurate. If you then look at it here, yes, we are using our athletes also in lifestyle activations. But we also have a lot of non-adthletes or people coming from different, I would say, parts of entertainment that are then used for marketing lifestyle product. You see Time, you see Kendall Jenner, you see Bad Bunny and and the activations here is, of course, both global and local, and there's a huge amount of activities going on. We would still say that especially for her, we have the hottest shoes and silhouettes in the market. Many of them has been stretched into new silhouettes. So the Sapa, for example, into both ballerinas, into Mules, into Mary Jes. We have a lot of low profile, and we have running shoes built on all constructions and on new constructions. And again, I have not the feeling that there's anything else in the marketplace that is hotter than we have across the globe. Then I would mention to you that is coming back, especially Jelwite. So again, the Standmith sector will start to grow again, and you will see many versions in addition to the OG Stansmith and you will see many activations with many different partners. Apparel, huge growth, not only in World Cup, but also in modern silhouettes and, of course, fabrics. I think especially online, we look extremely fresh. And we do see the heat, especially with her all over the world, although some of the products vary from region to region. And then when your brand is hot, your apparel is hot and your footwear is hot, you automatically then sell more accessories. And this is also what has happened with us also in addition to soccer balls, which, of course, has been growing because of World Cup, but we have fixed most of the sourcing issues we have, and therefore, you saw a 20% growth in accessories. So with that kind of background, I hand back to you, Harm, where you can take them through more of the financials.

Thank you, Bjorn. And of course, you're looking forward to get some more details on the financials. And I want to start, as always, with the top line. As Bjorn already said, 40% currency-neutral growth has been not just a record quarter from a top line point of view, but also has been a record first half. And in addition to that, we also had the highest retail sales ever in the quarter. So all of these are credit to the teams that created the product and executed on the sales side. So very, very pleased with the top line. When it comes to the gross profit, I would like to go a little deeper on this one and have a little bridge. I want to go on the right-hand side, starting from the bottom to the top. Of course, we had U.S. tariffs already last year in the second quarter, but this year, a little bit higher, giving the full impact of it. There are some mix effect on the sourcing cost a little bit on freight, and I'm just really saying a little bit on freight because it's linked to the war surcharge that we get into the Middle East. And then when it comes to FX, it's actually neutral. You might be surprised, but there's benefits on the U.S. dollar as we hedged on this one, but there are also other currencies like the Korean won, the Japanese yen, Argentinian peso, Turkish lira, whatsoever. And these countries are meanwhile, pretty significant. So it's eating up the benefits on the dollar, so it's fairly neutral. We had a small amount of U.S. tariffs refund. I know there are different phases. We only have recognized the first phase. We got some cash returned already. It has been a small amount, and we will talk later about the remaining phases and you saw it in the notes already. There's probably something in the second half that we haven't recognized in the second quarter in the amount of USD 250 million to USD 300 million that we still would expect to come towards us at some stage. The biggest piece that is actually moving the gross margin in the second quarter was very disciplined pricing, very disciplined on promotions. And of course, when you're growing 27% in e-commerce and 23% in retail, it has a positive channel mix as well. So the upper 2 are actually the moving part of the 51.7% to 52.5%. So very well done and very happy with the DTC growth that we have seen. Of course, what you're interested in is the increase in the marketing and POS expenses and the operating overheads. So with 30% growth in marketing and the 12% operating overheads, I want to immediately go a little deeper. -- even though we have some leverage on the operating overheads overall, but I want to explain that step by step starting with the marketing. And of course, in marketing, we always said we want to make the World Cup not just winning it commercially, which we no doubt did with the teams that we had and the 2 teams in the final, but we also wanted to make sure that we use that platform to win as a brand. And that's why we invested significantly, more than EUR 200 million. The exact amount is actually EUR 212 million, as Bjorn said. And yes, we indicated around EUR 150 million earlier we want to invest, but it has been so successful with 2 teams in the final, having the ball, having sell-out records in North America and Latin America. So we decided then short term to invest even more to pave the opportunity for the future. Secondly, yes, with growth in e-commerce of 27% and growth in retail 23%, there's a lot of variable cost in D2C. Especially in e-commerce, there's platform fees, there are freight cost to the consumer, there's customer service fees. And when you're growing that much, you might even pay a little bit more on customer service. This is what we see in e-commerce. There's a lot of variable fees. And of course, in retail, we leverage much more, but we also build up some pop-up stores. We also had extra staffing in the DCs. We had a lot of things that we did in order to fulfill the needs of the consumers and kept investing into this one. And rest assured, maybe we could have said that earlier, but very clearly, in the second half, you will see a normalized marketing spend. And on the full year, you should calculate in your spreadsheets around the 12% and you will see a much lower growth in Q3 and Q4 on the operating overheads and was really related to the D2C growth in the second quarter. And again, I take it on me that I could have probably explained that earlier, that's definitely learning on my side. When we go further down the P&L, I talked about the operating profit already, still an 8.5% operating profit with EUR 574 million, 5% up. And again, it's primarily as the gross margin is compensated for the operating overhead increase in D2C, it's primarily attributed to the marketing where we have been opportunistic to spend and potentially overspend on the event. When we go further down the line, no surprises on the financial expenses on the income taxes, income tax around 25%, similar to Q1, which leads to net income growth that is similar to the operating profit growth, operating profit 5% net income, 6%. So far to the P&L, very happy where we are, very happy what we've achieved in Q2, but also in the first half, which leads to the balance sheet, and I want to start with inventories again, currency neutral up 12%, but I want to immediately go into the details of that. Again, I said on the last call, we will be around the same as end of Q1. We came in a little higher. Some of that is linked to the Middle East, where we are not selling through as much as we would have wished. We counted a double-digit amount there. And of course, some FX plays into the absolute amount as well. But the most important point for me is that the composition of that inventory and 90% of that inventory is current or future seasons or goods in transit as we have it on the boat and only 9% is previous seasons, and that is not even enough to clear our factory outlets. And our planned buy for the factory outlets globally is north of 50%. So it gives you an indication the inventory is very, very healthy, and I have no concerns for the second half. Secondly, it comes to accounts receivables. They are slightly up with 30%, a little bit higher than what you have seen on the wholesale growth and some timing effects in there. We, of course, work with some of our partners as well to make sure we support them in the right way during the World Cup, but that is also something that you will see coming down in the third quarter as we're collecting post World Cup, payables have normalized. And of course, operating working capital is slightly up compared to inventories and accounts receivable as you combine these 2. Talking about operating working capital, of course, that direction doesn't look good. But as you know, we invested into holding the inventory and receivables for the World Cup. It was the right decision to win this one commercially. And our guidance is 22% to 23%, and there's no reason to not believe that we get to that guidance until the end of the year, and you can hold me personally accountable for it that we get to that guidance of 22% to 23%. So also that is going in the right direction. To sum it all up, you see it also on the cash and cash equivalents despite doing a share buyback of EUR 500 million in the first tranche and then already EUR 250 million on the second tranche and paying a dividend of EUR 500 million. We added to our cash, and we are almost at EUR 1.2 billion. Also, that is something where we made tremendous improvement in the first half compared to last year, and there's more to come. So I'm very optimistic from a cash flow generation point of view, there's another EUR 1.2 billion to EUR 1.3 billion cash flow coming in the second half and will help us to finish on a very strong cash balance for the end of the year. Talking about the share buyback and the dividends, EUR 500 million has been done in the first tranche. We already did EUR 250 million, around EUR 250 million in the second tranche with 1,380,000 shares being bought back. So together with the dividend, we will return to shareholders around EUR 1.5 billion this year. And you all know, we could not have done that without being in such a healthy situation as a company. So very, very happy where we are. You also see that with the cash and cash equivalents, how it's developing despite the share buyback and also in adjusted net borrowings, we are finally going in the right direction again, moving from EUR 5.5 billion to EUR 5.2 billion. And what's important for our S&P and Moody's that also leverage ratio is consistently remaining below our policy of 2.0. So we are actually improving from 1.7 to 1.6. So also there, we are very diligent on how we're using our cash and how we return to shareholders, and we are feeling very good about the second half. With that, talking about the second half, back to Bjorn.

Thanks, Harm. Yes, you've seen this slide many times. When we started 3.5 years ago, we had some issues, and we said that we needed that time to go through the process and that in '26, we will then be a healthy and successful company. And we can always do better, but we felt that we have delivered what we told you and feel that the platform for this company is actually in great shape. The ambition, again, for each market should be the #1 in the market. Of course, they will not all achieve it, but at least we're having a discussion what is necessary in the different markets. And it shouldn't be a surprise that outside of the U.S., we are starting to actually be #1 in many markets. In the U.S., I've said many times, it would be unrealistic knowing how far behind we are and that we have many, many years that we need to invest to kind of be competitive with the leader, but we still believe that we have plans, investments and resources then to double our business. And I think you saw growing 15%, 17%. We are on the way also to get closer to that. The business model that we talk about, you've seen many times, too, to be a global brand with a local mindset. I hope you agree that you have to start with the consumer and the athlete. And to do that, you need to be close to him and her, and that happens in most markets and regions. And then you need a strong global headquarter that facilitates for innovation, concept systems and the frame. and that we then need a network of people, both local and global that work together. And it's fair to say that we now have a leadership group globally of 32 people. We spent also 2 days after World Cup in New York. And I feel very, very strong about the team and feel that we have made many, many changes. And most of the people, if not almost all, are internal promotions. So they know adidas, they have the right culture, which adidas should stand for, and I feel we have a really, really good team. It should also not be a surprise that then we locally need a footprint in product and activations that fits the market. And when you see on the left side, we added the Penn State and Tennessee colleges, universities to be more visible in American sports, and that's a journey that we probably should have done a long time ago that we have started and John and his team are very aggressive on that side, and that is the way then to be a real American sports fan. And the same goes for other markets here. You see Korea when it gets to baseball. You see Ranvir Singh, who's a cricket player that were then in India using also in our originals lifestyle collection. And in China, which is on fire, we even have a premium looks collection above everything because we clearly see that the consumer with a lot of money is also trending towards our brand because of what the local team is doing with our global concepts. And the same go for stores. The rule is to activate what is relevant for the consumer. That's why at any point in time around the world, there might be different activation should not be a surprise for you that Barcelona right now is still celebrating the World Cup and the win of Spain. While in other areas, we have turned into lifestyle or local partners. And again, there's a lot more energy in the teams when they can do what they think is relevant. And the same goes for, I would say, normal activations, why activate something in a market that is not relevant. And I think we have found the recipe for that and the energy in the markets are very, very, very high. Coming out of the World Cup, you might say, so what is happening now? Well, right now, in soccer, we're launching all the club jerseys -- and remember, last year, the start of the sales of club jerseys was slow. Now it's actually the opposite. And I think it has to do coming out of the World Cup, there's a huge interest in football again. And of course, when I look at our product, I think both with the home jersey and with the free foilerway jerseys, we look extremely good and our bookings for the time being also very, very good sales numbers. In the women's training area, you have seen that many brands have had collections that have been either with collab partners or there has been brands that not necessarily come from sports sport. Instead of doing a collab, we then decided to do original sport. We have that consumer through our fashion and especially on the footwear side, and we have then designed with her in mind an OG sport collection with functional fabrics great colors, very, very, I would say, functional and good-looking cuts. It's been in the stores around the world for a week and the reaction both from what we can measure in interest, but also in sales has been great. So another dimension of being very, very strong with her. You heard about HyperBoost, which we started in comfort Running. We are now extending the foam into lifestyle. So here, you see HyperBoost euphoria. And the same thing here, initial reaction great. And then we will build out bigger collections with the HyperBoost as we go forward. On the fashion side, we have a great cooperation with ASOS. You've probably seen it that we do test collections almost as fashion shows. And depending on the reaction, we then scale certain items. We do this on a regular basis. So far, it's only been for her, but going forward, it will now also be for him. And it's a very unique business model that has been very successful both for them and for us. So when we look at it, both on the performance side and on the lifestyle side, we feel that we have enough momentum to continue the growth. In addition to what I just told you about, we will also start to load up the FIFA Women's World Cup that will happen in '27, but you will see activations already in '26. You know it's in Brazil. And I think we all agree we need to lift the activities around women's soccer. You will have a new Aero Pro 5 coming from Berlin Marathon, where I wouldn't be surprised if he runs another world record. And then we will have Anthony Edwards coming with the third version of a single shoe. This is just part of it that we think will assure them the growth and the interest in the brand also in the second half of the year. When you look at the guidance, you know we started with high single digit and CHF 2.3 billion in sales. We updated the guidance this morning and said we now believe in 9% to 10% growth, and we kept the profit at CHF 2.3 billion. I'm sure in your spreadsheet, you said, so this means then 6% growth in the second half. Yes, that's the math. The reason why we don't go higher is that if you look at our wholesale business, it's currently trending at 6%, 7%, and you cannot plan your D2C business higher because you don't know. But there is a chance when I look at the trend that it will be higher. And then, of course, there is an upside to this. I also would tell you that the EUR 2.3 billion does not include any tariffs going into the future. It's a small booking in Q2 that is not really relevant. And as you know, there is about EUR 300 million sitting there, where there is a pretty high probability that we will get it. So far, we haven't booked it. I know competitors have, but we will, of course, tell you if we book it. That goes to '26. We then told you that '27 and '28, we should continue the momentum. We, as a company, will not change our business plan because we believe in our business model, we believe that is the right one. But of course, there are improvements that we can do when it gets to continue to decrease complexity and optimize processes, systems and organization. And we will, of course, utilize AI to help us on this. And I do think you also agree we need short term to be successful, but without putting long term in danger. And we feel, although looking at today, you might disagree that we are delivering what we said and that we're giving us the platform to be a very successful company going forward. And then just to finalize, we still confirm that we believe we can grow EUR 2 billion every year in '27 and '28, which will then bring us into the famous double-digit EBIT margin, which, again, under the certain condition are not many brands who are doing. So I think with that, we have kind of told the story, and I'm handing back again to you, Sebastian.

Yes. Thanks very much, Bjorn. Maura, we are now ready to take questions.

[Operator Instructions]. The first question comes from the line of Grace Smalley from Morgan Stanley.

My first question will be on the footwear business. If you could just go into further detail on what you're seeing in Lifestyle footwear and how we should think about the outlook for the Lifestyle footwear into the second half of this year and into 2027? And when you look at the total footwear business, would you expect it to continue to decelerate from here? And could it potentially turn negative into the second half? Or do you actually expect the business to improve from here as hopefully the kind of competitive dynamic changes? And then my second question would just be on the U.S. Very clear that you executed very well on the World Cup in the second quarter. Beyond sort of the short-term benefit from the World Cup, how are you thinking about the long-term impact and whether you've been able to use this event really as a catalyst to gain lasting consumers, but also, I guess, lasting shelf space with your U.S. retail partners as well?

Yes, good questions. I do think when you do your store checks, you will see that the lifestyle footwear, especially for him is currently pretty heavily discounted. And that is because major brands have quite some inventory that have been sold in and very famous, what should I say, franchises that used to be full price are now currently at a discount. That means that newness onto the shelf for full price is not easy, at least not scaled. And we see that if we keep the styles on our D2C business, we are able then to keep a higher price. And then you know that this is a fine balance I do think that you will see a flattish lifestyle shoe market in the beginning of the year. And hopefully, you will see an improvement in Q4, Q1. I guesstimate, and I cannot tell you what will happen in D2C because I don't know. But if I look at our order book, we should turn into growth again in footwear in Q4 because that's what we see. And that could be accelerated if the inventory in general also from other companies in the chains are changing. When it gets to the World Cup, yes, it's clearly that many retailers in addition to us in U.S. made money with us during this time. And that when a retailer makes money with you, he or she would, of course, like to make more money. So there is a big chance that we will then have increasing buys and more shelf space with many retailers. had the feeling that all the big retailers also on performance have a different view on our brand and our business than they've had before. And that our local team with the investments that they've done in college sport in merchandise, but also the signing of baseball players and American football players and also doing local campaigns, we are on the way of being also more seen as a sports brand for the consumer, both him and her in the U.S. If you then add the OG Sport, which actually was targeting her in the U.S., it was kind of the sign with an American female consumer in mind. I do think that you will see more stripes and more of our product also in the performance area. And I think on footwear, we are already there with her. And we, of course, hope with all the things we have in the pipeline that we can get more shelf space also for him in American street retail. And we are pretty optimistic coming out of a 15%, 17% growth in the U.S. for the future. But as you know, that's also the market where we need more growth. And of course, it's the one that we are behind by a stretch and have a lot of work to do. But I would say positive development.

Next question comes from the line of Geoff Lowery from Rothschild & Co Redburn.

Just coming back on this footwear performance issue at the moment. Is the performance of the footwear any stronger in your own DTC relative to your sell-out in wholesale? I'm just looking for things that could give us encouragement about the potency of that product when the wholesale overstock completes. And then the second question is a rather basic one. For Q2, was 5% EBIT growth, the profit plan? Or is there EUR 50 million, EUR 60 million of investment in marketing that came into the quarter that perhaps wasn't there 3 or 6 months ago in your plan?

Yes, the sell-through in our own channel is higher than in wholesale. That's correct. But that's also because the offer is wider. And on performance, I would actually say that the sell-through also in wholesale is strong. It's the lifestyle, both sell-in and sell-out, especially for him, which is lagging currently. And it has been lagging, I would say, for the last 6 months because of the discount that is in the market. When it gets to your second question on if there was any additional marketing, yes, there was some activations that came on top. I think we said that we had an extra marketing of about EUR 212 million. And I think the first estimate we had was around EUR 150 million. So it is true that during the tournament, we took decisions to actually activate more based on local needs. That is correct.

Next question comes from the line of Aneesha Sherman from Bernstein Societe Generale.

I have 2 questions, please. One kind of following on the prior question around wholesale. You've talked about holding back wholesale growth while competitors being very promotional. As we're seeing some of the big promotional phases with these big retailers starting to wind down, we've seen that in North America. We've seen that with some recent announcements in China. Are you more optimistic about opening up wholesale sell-in? And does that help Q3 at all? Or is that more Q4 into Q1? And then a second -- related to this, the second question around operating overheads. You're currently very DTC heavy, which, as you mentioned, is higher cost in terms of overhead. How important is that wholesale DTC balance for you to be able to meet your midterm goal of reaching 30% operating overheads?

The second question is that should you only be D2C, then your margin is higher and your overhead is higher, then the 30% doesn't mean anything. So the 30% is based on a 60-40 split. So you have to remember that if you sell D2C, your margin is much higher, but then also your cost percentage is higher, but your EBIT should also be higher. So we're not dependent on holding the 30% should the split go to a higher D2C part than the 40%. But again, I have to admit that there wasn't any goal to actually accelerate D2C, but it was the demand that was so strong. And as we said before, the order book from retailers in the last 6 months was very cautious. And as you probably have seen yourself, you know the reason. So again, this is not a strategy that we're driving, but it's actually a result of where the consumer is shopping. Should this be a pattern that continue, then the split between wholesale, retail would then move from 60-40 to something else, then you should expect the growth in the gross margin and therefore, also a growth in the overhead, but then the EBIT should also grow to be more than 10%. This is the way the math work. When it gets to the cleaning up the wholesale, I mean, first of all, what you talk about China and competitors, that will not happen in the next month because remember, when you're switching off a part of a wholesale channel, that takes more time. So I'm not sure that will have an impact. And you also probably know that our business in China is on fire. So we don't need any help there. I think the wholesale community that is difficult right now on footwear has been in Europe and in the U.S. And we hope and we believe when we look at the order book that Q4 will actually be an improvement. But again, we don't control it alone, right? So yes, wholesale footwear should start to improve. If that is Q4 or Q1, I don't know. And as always, what we try when we see that something shouldn't work that we don't get the growth, then we will try to get the growth somewhere else. Important for us is that we have enough growth to actually hit our targets, and that is what we have done. And then without doing anything that actually hurts the brand, -- and I do think you agree that Q2, there was nothing in distribution or activations that would hurt the brand. I think everything that you can measure was the opposite that the brand came out of World Cup and the quarter stronger than it went into it. So we are internally with what we can control, actually very happy and are a little bit sad that we've not been able to actually explain it to you in a way that you would be happy to. But maybe over time or I'm pretty sure that will actually change.

The next question comes from the line of Jurgen Kolb from Kepler.

Two ones. First one on China. In China, you reached a 27.6% EBIT margin in H1, if my calculation is correct here. So we're getting closer to the 30% again or above 30%, what used to be the peak margin or the strong margin in China. Initially, I think in the past, you indicated that you think high 20s could be possible. This is where we are right now. What do you think is still in in China? How much margin potential do you see given the fact that, obviously, your brand is on fire, you're adding a luxury component. Your one of the main competitor is making some strategic decisions, which may open up possibilities. So maybe some words on China, if you have. And then secondly, the gross margin, obviously, in in the second quarter was strong with all the puts and takes that affected the business, but led to a very strong gross profit margin and indication for brand heat. What do you think is possible for the second half, but also maybe a first look into 2027 with your indications on hedging again and all the other impacting factors.

Your calculation on China is correct. Your conclusion that we have brand on fire is also correct. I would like to add that the diversity in the products that we have in China today is much stronger than when it peaked at 30. I think when you go back to those days, the best brands were selling, I call it, commodities with logos on, and you know that the margin on cotton hoodies and T-shirts and stuff were very high. If you look at the product now, the local team is investing in sports and they're investing in a big variety of segments. So I think that the solidity of our business is much, much stronger. And I still do think that the high 20s is a realistic, what should I say, margin. You also have to remember that we're now sourcing local. So we're sourcing in China with Chinese currency. So the variances we have on hedging and stuff in China is almost 0. And at the same time, because we're sourcing in China, we are closer to the market. So there's a lot more replenishment and changes in the buy, which then takes the risk down, which again should then reduce the markdowns and in the wholesale business, reduce the -- and we see all these things currently happening. And I can also say to you that we are balancing much more the business from a quarter-to-quarter. We used to have filling in the wholesale partners and then do a lot of takebacks in Q4. And what we are trying to do now is, of course, reduce the amount of takeback totally. And then actually, if there are managing that month by month and quarter-by-quarter. So I think the local team has the business much more under control than they had before. The impact of our competitors' action in China is unknown. I mean, of course, we have seen and heard what they're doing, but I think it's far too early to say how that's going to be executed and the impact that, that will have. And again, as soon as we know and we see, you will probably see it and hear it from us. But I think we will first have to see if it happens and how it happens. Gross margin, I think I'll leave off to you. Harm?